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Preface
Contributors
Title
Index
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Preface
Paul C. Dinsmore
I. Overview
This section provides a helicopter view of project management. Webster’s “What Project Management Is All
About” sets the conceptual stage and defines the basics. In “An Overview of Project Management Principle
for Executives,” Dinsmore gives six lessons to ensure success in managing projects. And Stretton’s
“Developing a Project Management Body of Knowledge” discusses the universe of information encompassed
in the project management discipline.
The second part of the Handbook, on the applications of project management, contains six sections. They are
as follows:
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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About the Editor
Paul C. Dinsmore is an international speaker and seminar leader on project management. He is the author of
five books, including Human Factors in Project Management (second edition, AMACOM, 1990), and he has
----------- written more than sixty professional papers and articles. Mr. Dinsmore is president of Dinsmore Associates, a
training and development group, and director of Management Consultants International, a consulting firm
specializing in project management. Prior to establishing his consulting practice in 1985, he worked for
twenty years as a project manager and executive in the construction and engineering industry for Daniel
International, Morrison Knudsen International, and Engevix Engineering.
Mr. Dinsmore has performed consulting and training services for major companies including IBM, ENI-Italy,
Petrobrás, General Electric, Mercedes Benz, Shell, Control Data, Morrison Knudsen, the World Trade
Institute, Westinghouse, Ford, Caterpillar, and Alcoa. His consulting practice has included projects on
company reorganization, project start-up, development and implementation of project management systems,
and training programs, as well as special advisory functions for the presidents of several organizations.
Project management applications include the areas of product development, concurrent engineering, software
development, company reorganization, and engineering and construction.
Mr. Dinsmore is feature editor of the column “Up & Down the Organization,” published in PMNET, the
magazine of the Project Management Institute. He participates actively in such professional associations as
INTERNET (the International Association of Project Management), NSA (the National Speakers
Association), and PMI, which awarded him its Distinguished Contributions Award.
Mr. Dinsmore graduated from Texas Tech University and completed the Advanced Management Program at
Harvard Business School.
Acknowledgments
In completing this project I drew upon the knowledge, comprehension, patience, and diligence of many
people. The cornerstones of the project have been the Supporting Editor, Frank Galopin, and the Advisory
Editors—John R. Adams, Russell D. Archibald, Harvey A. Levine, and John Tuman, Jr.—to whom I am
indebted for their guidance and counsel. I am also deeply thankful to the contributing authors who submitted
the chapters that constitute the basic content of the Handbook. I also appreciate the highly professional
comments of Myles Thompson, former AMACOM Acquisitions Editor, and Jacqueline Laks Gorman, who
did the developmental and copy editing. Final thanks go to Maria de Lourdes Malta, who provided manuscript
and office support for the project.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Part I
Project Management Concepts and Methdologies
----------- Section I
Overview
Chapter 1
What Project Management Is All About
Francis M. Webster, Jr.
Western Carolina University, retired
Projects are unique undertakings that result in a single unit of output. The installation of an entertainment
center by a homeowner with the help of a few friends is a project. The objective is to complete the installation
and enjoy the product of the effort. It is a unique undertaking because the homeowner is not likely to repeat
this process frequently. It is not unusual, however, for multiple units to be involved in a project at one level of
detail or another. A high-rise building typically involves multiple floors, each of which are nearly alike.
Installing the windows in such a building certainly involves multiple units. Even though the building is
managed as a project, these multiple elements may, in fact, be managed in another manner. There are more
economical ways to produce multiple units of a product, such as the mass production techniques used on
assembly lines.
Projects are composed of activities, usually nonrepetitive, operating on an interrelated set of items that
inherently have technologically determined relationships. One activity must be completed before another can
begin. Generally, these technological relationships are very difficult to violate, or to do so just does not make
sense. For example, if getting dressed is considered a project, it just does not make sense to put your shoes on
before your socks. Whether to put on both socks and then both shoes or to complete the left foot before the
right foot is in most instances a question of preference. In modern project management, a network diagram is
used to portray these technological sequences. Exhibits 1-1 and 1-2 illustrate the use of networks to describe
alternative ways of putting on socks and shoes. In Exhibit 1-1, both socks are put on first, then both shoes. In
Exhibit 1-2, the preference is for putting on the right sock and shoe before the left sock and shoe.
Exhibit 1-3 shows a parallel network and does not imply that both socks are put on at once. Rather, it provides
flexibility to determine the actual sequence based on other criteria. It is important for planners to focus on the
technological relationships to prevent implicitly scheduling a project before really understanding the
alternatives available. Exhibit 1-4 shows a network that would be nonsensical in most instances. Not only
does it imply putting the sock on over the shoe but also putting both socks on the left foot.
Exhibit 1-1. Network diagram with preference for putting both socks on first, then both shoes.
Exhibit 1-2. Network diagram with preference for putting right sock and shoe on first, then left sock and
shoe.
Projects involve multiple resources, both human and nonhuman, which require close coordination. Generally
there is a variety of resources, each with its own unique technologies, skills, and traits. This leads to an
inherent characteristic of projects: conflict. There is conflict between resources as to concepts, theory,
techniques, etc. There is conflict for resources as to quantity, timing, and specific assignments. Thus, a project
manager must be skilled in managing such conflict.
The “project” is not synonymous with the “product of the project.” The word project is often used
ambiguously, sometimes referring to the project and sometimes referring to the product of the project. This is
not a trivial distinction as both entities have characteristics unique to themselves. The names of some of these
characteristics apply to both. For example, the life cycle cost of a product includes the cost of creating it (a
project), the cost of operating it, the cost of major repairs or refurbishing (typically done as projects), and the
cost of dismantling (often a project, if done at all). The project cost of creating the product is generally a
relatively small proportion of the life cycle cost of the product. Exhibit 1-5 depicts the relationships that exist
between the life cycles of projects and products of projects.
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Title Consider a new product derived from basic research and then product research leading to design and then
production. The first three phases of the product’s life cycle—basic research, product research, and
design—could each be one or more projects, each sharing the same objective: creation of a product. This
product may require a facility for its production which, through the feasibility and acquisition phases, is
created by a project. That project in turn is composed of four phases that make up its life cycle: concept,
----------- development, implementation, and termination. Upon completion of the project, the operation of the facility is
conducted in such a way as to prolong the life of the facility to the degree practicable. Integral to this process
are a number of efforts to maintain and rehabilitate the facility, which are accomplished by projects. When the
facility is no longer economically viable, it may be disposed of in some manner, often by a project.
When the product is designed and the facility completed, the product goes into production. The product goes
through a marketing life cycle that is generally depicted as four phases: introduction, growth, maturity, and
decline. Product introduction is a project and various aspects of the product growth phase are aided by
performing projects, such as the advertising campaign. Often, to extend the life of the product, various
projects are undertaken to improve the product, develop alternative versions of the product, etc. To extend the
useful life of the facility, other projects may be undertaken to improve or develop variations on the product.
Exhibit 1-5. Comparison of project and product life cycles.
Managerial emphasis is on timely accomplishment of the project as compared to the managerial emphasis in
other modes of work. Most projects require the investment of considerable sums of money prior to enjoyment
of the benefits of the resulting product. Interest on these funds is a major reason for emphasis on time. Being
first in the market often determines long-term market position, thus creating time pressure. Finally, a need
exists for the resulting product of the project, else the project would not have been authorized. Thus, time is of
the essence. This time pressure, combined with coordination of multiple resources, explains why most project
management systems have emphasized time management.
It is helpful in understanding a concept to recognize and compare it to other similar concepts. This requires a
taxonomy or classification of the modes in which work efforts are accomplished. There are five basic modes:
craft, project, job shop, progressive line, and continuous flow. While most organizations perform some work
in several of these modes, generally one mode is dominant in the core technology of the organization. All of
these modes can be characterized as processes composed of one or more technologies/operations.
Technologies in this sense does not imply just engineering or manufacturing but includes all sorts of office
technologies, including the copier as well as the computer and the “technologies” involved in producing an
advertising or political campaign, designing a training program or a curriculum, or producing a movie. The
following are definitions and discussions of the four modes other than a project.
1. Craft: A process composed of a collection of one or more technologies/operations involving
homogeneous human resources, generally a single person, producing a narrow range of
products/services. This is best characterized by the single artist/craftsperson producing one unit of
product at a time. Other examples are a single cook preparing a meal to order or a doctor examining a
patient in the doctor’s office.
2. Project: A temporary process composed of changing collections of technologies/operations
involving the close coordination of heterogeneous resources to produce one or a few units of a unique
product/service.
3. Job shop: A process composed of a loosely coordinated collection of heterogeneous
technologies/operations to create a wide range of products/services where the technologies are located
in groups by function and the time required at each workstation is varied. This is best characterized by
the manufacturing plant in which equipment is located or grouped into departments by type or function,
and the product/service is performed by moving the unit being worked upon from one department to
another in a nonuniform manner. It is also the mode of operation of most kitchens and the one
frequently used for physical examinations performed in hospitals.
4. Progressive line: A process composed of a tightly coordinated collection of heterogeneous
technologies/operations to produce a large quantity of a limited range of products/services in which the
technologies are located serially, the operator is directly involved in the work on the product, and the
time allotted at each workstation is the same. The automotive assembly line is the stereotypical
example, with the product moving from station to station in a cycle time of approximately sixty
seconds. (Since this mode is used for both assembly and disassembly, the more general term
progressive line is more appropriate than assembly line.) The progressive line is also the typical mode
of serving for cafeterias and the mode in which physical examinations are given to large groups of
people such as for the military. Note that manufacturing cells and kanban operations fit into this
category. The progressive line mode can be used within a project. One example is a project to construct
740 houses in a development. The houses were in fact erected in the progressive line mode with
multiple crews, each crew performing a very specific task on each house. On this line the crews moved
from house to house with a cycle time of approximately one day.
5. Continuous flow: A process composed of a tightly coordinated collection of technologies/operations
that are applied uniformly over time and to all the many units of a very narrow range of
products/services, and in which the role of the operator is primarily to monitor and adjust the processes.
Petroleum refineries are the most popular example of this mode. Other examples are electric generating
stations, water as well as sewage treatment facilities, and automatic transfer lines such as those used in
producing engine blocks and transmission housings.
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Title Understanding the economics of these modes, as shown in Exhibit 1-6, reveals a fundamental driving force
for attempting to move from the craft mode as far as possible toward the continuous flow mode. For a given
type of work, the craft mode generally requires the least capital investment or fixed costs but the highest
variable cost per unit, while the continuous flow mode requires large capital investments or fixed costs and
very low variable costs per unit. The other modes tend to be arrayed between these two extremes. Thus,
----------- regardless of the major mode for a given undertaking, there should always be a search for subsets of the work
to be moved to the more economical mode. This was done, for example, for the 80,000 seats in the Pontiac
Silverdome, which were installed in the progressive line mode. It is being done in the English Channel Tunnel
project, where the digging, moving of tailings, and pumping of slurry to the tailings pit are all done in the
continuous flow mode. (As a matter of fact, all modes can be observed on that project.) At a simpler level,
programs for an athletic event such as a swim meet have been assembled in a progressive line mode while the
overall effort to conduct the swim meet itself was a project.
A Further Abstraction
Given the definition that a project is a temporary process to produce one or a few units of a unique
product/service, it is appropriate to examine the characteristics of the process. Consider the following: The
essential characteristics of the process by which a project is performed is the progressive elaboration of
requirements/specifications. A project is initiated by a person (perhaps a member of an organization)
recognizing a problem or opportunity about which some action is to be taken. That person, alone or in
concert, develops an initial concept of the action to be taken in the form of a product, be it a product for sale, a
new facility, or an advertising campaign. Much work needs to be accomplished to take this meager concept to
the reality of the product. This work, though often not conceived as such, is accomplished by instituting a
project.
The general concept is expanded into a more detailed statement of requirements. These are examined for
feasibility—market, technical, legal, organizational, political, etc.—resulting in further refinement of the
specifications. These are then the basis for general design, the products of which become the basis for detail
design. The detail designs are followed by production designs, tooling, production instructions, etc., each
stage producing an elaboration on the specifications of the prior stage. Eventually, the product of the project
takes shape, is tested, and is ready for operation. At this stage, give or take a few details, the project is
completed. This characterization of projects permits the adaptation of modern quality management concepts
into the management of projects.
The above is a rather lengthy discussion to clarify the nature of a project, but it is nevertheless an essential
step in comprehending what project management is really all about.
Project Management
Project management as a unique career and profession is barely thirty years old. Its origins can be traced back
to efforts such as U.S. Department of Defense major weapons systems development, NASA space missions,
and major construction and maintenance efforts as well as comparable efforts in Europe. The magnitude and
complexity of these efforts were the driving force in the search for tools that could aid management in the
planning, decision making, and control of the multitude of activities involved in the project and especially
those going on simultaneously.
A major misconception about project management is that it is no more than PERT (Program Evaluation and
Review Technique), CPM (critical path method), or other methods of project scheduling using software. A
more realistic view is that scheduling software is a small part of project management. Its importance is that it
has permitted scheduling and cost management to be done much more efficiently and therefore in less time, in
more detail, or both. Thus, a project can be planned and executed more precisely, leaving more time to
perform the other aspects of project management.
An important way to view project management is that it is the management of change. This statement is more
meaningful when contrasted with two other types of management: operations and technical. Operations
management can be characterized as managing the steady state. Executives tend to be concerned about setting
up a new operation (a project) to implement organizational strategy. As soon as the operation is established,
the concern is more with maintaining the operation in a productive mode for as long as possible. Technical
management tends to focus on the theory, technology, and practice in a technical field, concerning itself with
questions of policy on strength of materials, safety factors in design, checking procedures, and the like.
Project management, then, is the interface between general management, operations management, and
technical management which integrates all aspects of the project and causes the project to happen.
Project Integration
If there is a single word that characterizes project management, it is integration. It is the responsibility of the
project manager to integrate the efforts of the varied human resources; the variety of equipment, supplies, and
materials; and the technologies to produce the product of the project in conformance with the
requirements/specifications, on schedule, and within budget.
The project environment is inherently dynamic. It is impractical, if not impossible, to predecide all aspects of
the project, and inevitably things do not always go as planned. The project manager is the focal point for
gathering the relevant information, making adjustments in plans, and communicating the new plans to all
concerned. Project management is, by its very nature, a challenge to conceptualize, plan, implement, and
close out the project within the triad of cost-schedule-performance.
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Resource Allocation
This is an essential process that both determines the cost of the project as defined and provides control over
the project participants. Viewed simply, it is the budget. But even managing the budget per se neither brings
the project in under budget nor on schedule. The project manager must ensure that the allocation of specific
resources is adequate but not excessive and that the right resources are assigned to the right tasks. This is not a
simple procedure because of the number of activities that can be in process simultaneously. Fortunately,
modern project management software provides considerable assistance by identifying those activities which
are most critical, the number of units of resource required by day for a given schedule, and the activities on
which a critical resource is required. Nevertheless, having identified the critical decision areas, human
judgment is still required to evaluate and make the final decisions.
Scope Management
“The scope of a project can be either the work content or components of the project. It can be fully described
by naming all activities performed, the end products which will result, and the resources consumed.”3 The
scope statement is a vital document as it defines the project, not only what is included but what is not
included. One manager of project managers commented that managing the scope of projects was his most
important and troublesome assignment. On the one hand, he had to ensure that the client’s needs had been
met, but on the other hand, he had to ensure that any work content not in the originally contracted scope
statement could be billed to the client.
Quality Management
The definition of quality is simply “conformance to requirements/specifications.” If the requirements for the
product of the project are consistent with the real, or perceived, needs of the client/customer, then the
client/customer is likely to be satisfied with the product of the project. The product either conforms to these
requirements or it does not. Quality should not be confused with excellence, luxury, prestige, “gold-plating,”
or other terms that describe the product of the project in qualifying degrees. These terms may be applied to the
statement of requirements/specifications, but quality then refers to conformance to these
requirements/specifications. There can be waste involved in producing a product or service that exceeds
requirements just as surely as in producing a product that falls short of requirements. This definition of quality
is the essential concept on which quality management operates.
The concept of a project as a process is essential for the application of process control to the management of
projects, and more specifically, statistical process control applied to reduce variability. The concept of the
progressive elaboration of specifications as the essential nature of the process fits with the quality concept that
the customer is the next person/operation in the process. The “customer” is the next engineer, the tool builder,
the ad layout person, and so on. If the product going to the customer has no defects, he or she can perform his
or her task in the most efficient manner—and do the right thing right the first time.
It should be noted that this same concept of conformance can apply to the project itself as a measure of how
well it was planned and executed relative to such things as environmental and safety expectations of society.
Quality Management for Projects and Programs, a book by Lewis R. Ireland, published by the PMI,
amplifies on these concepts.
Time Management
The management of time is crucial to the successful completion of a project. In some large projects that run
for several years at costs in excess of $1 billion, the financing charges can approach $1 million per day. Even
in many smaller projects, especially in a competitive market, it is essential to complete projects on time or
lose the edge in the marketplace.
The function of time management has been divided into four processes: planning, estimating, scheduling, and
control. Planning includes depicting what is intended to be done, how it will be done, and what will be used to
do it. Estimating is the determination of the duration required to perform each activity. Scheduling determines
the time period in which it is intended to perform the activity, recognizing both time and resource constraints.
Control includes a recognition of what has happened and taking action to ensure that the project will be
completed on time.
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These functions of project management are pervasive throughout the project, providing the richness which
gives the fabric its life and character. Projects can be performed with little attention to the details of these
functions, but the probability of surprises, of conflicts among participants, and of misunderstandings are
greatly increased when these functions are performed poorly. Ultimately, the probability of success of the
project is greatly improved by knowledge and skilled use of these functions.
Risk Management
Risk management in the project context is the art and science of identifying, analyzing, and responding to the
risk factors throughout the life of a project and in the best interests of its objectives. It may also include
consideration of risks associated with the product after the project itself is completed. The term risk
management tends to be misleading because management implies control of events. On the contrary, risk
management must be seen as preparation for possible events in advance, rather than simply reacting to them
as they happen. With time in hand, it is possible to identify alternative action plans and select that which is
most consistent with project objectives. Risk management is the formal process whereby risk factors are
systematically identified, assessed, and provided for. Such provisions constitute response planning and may
include such defensive actions as mitigation by risk avoidance, deflection by insurance or contractual
arrangement, and contingency planning such as the provision and prudent management of budgeted
contingency allowances to cover uncertainties.
Human Resources Management
The project manager is responsible for developing the project team and building it into a cohesive group to
complete the project. Two major types of tasks are recognized: administrative and behavioral. Administrative
tasks include employee relations, compensation, and evaluation, as well as government regulations and
evaluation. Much of the administrative activity of the project manager is directed by organizations and
agencies outside the project. Understanding how these work can facilitate the process. The behavioral aspects
deal with the project team members, their interaction as a team, and their contacts with individuals outside the
project itself. Included in these are communicating, motivating, team building, and conflict management. The
finite life and unique nature of projects places a premium on knowledge and skills in managing human
resources.
Contract/Procurement Management
Inherent in the process of managing a project is the procurement of a wide variety of resources. In most
instances, this requires the negotiation of a formal, written document, generally called a contract. Thus,
procurement/contract management is essential knowledge. Different types of contracts are likely to elicit
different types of behaviors by both the contractor and contractee. These need to be matched to the
requirements of the project. The processes of initiating, evaluating, negotiating, and administering contracts
are essential skills. In a global business environment it is also essential to understand varying social, political,
legal, and financial implications in this process.
Communications Management
Successful project managers are constantly building consensus or confidence in decisions at critical junctures
in a project by practicing active communications skills. The project manager must communicate to upper
management, to the project team, and to other stakeholders. The communications process is not always easy
because the project manager may find that barriers exist to communication, such as lack of clear
communications channels and problems with technical language that must be used. The project manager has
the responsibility of knowing what kind of messages to send, knowing to whom to send the messages, and
translating the messages into a language that all can understand.
Conclusion
Projects fill an essential need of society. Indeed, projects are the major mode in which change is accomplished
in a society. It is the mode in which corporate strategy is implemented.
Projects need be neither large, high-tech, nor complex. Their management is often complex because of the
need to coordinate closely the heterogeneous resources in a manner to achieve the objectives of the project
efficiently and effectively. This is further compounded by the fact that the mix of technologies/operations are
constantly changing over the life of the project. And, this must be accomplished by doing the right thing right
the first time, often each time with a completely new set of players.
It is clear that a project is a process. The essential concept of this process is that it is the progressive
elaboration of requirements/specifications. From this it is easy to integrate the essential concepts of modern
quality management, including conformance to requirements/specifications, do the right thing right the first
time, the customer is the next person/operation in the process, and ultimately the reduction of variability
through statistical process control.
Such a conceptualization and definition is critical to the future of project-oriented industries and organizations
as they strive to match the performance of volume manufacturing organizations in achieving quality and
reliability levels for which defects are measured in parts per million. It is critical to all organizations that hope
to survive in a world where change is happening at an increasing pace, for projects are the means for
responding to, if not proactively anticipating, the environment and opportunities of the future.
Acknowledgement
Appreciation is expressed to the Project Management Institute, P.O. Box 43, Drexel Hill, Penn. 19026, for
permission to use extensively material contained in the Project Management Body of Knowledge (PMBOK).
Notes
1. Project Management Institute, Project Management Body of Knowledge (Drexel Hill, Penn.: PMI,
1987).
2. Ibid.
3. Linn C. Stuckenbruk, The Implementation of Project Management: The Professional’s Handbook
(Reading, Mass.: Addison-Wesley/Project Management Institute, 1981).
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 2
An Overview of Project Management Principles for
-----------
Executives: Six Lessons to Ensure Success
Paul C. Dinsmore
Dinsmore Associates
Project management, old in history and new as a management science (with most writings on the subject
dating after 1960), is built around the cornerstone of accomplishing goals. The setting is generally complex
and constrained by time, involving different groups and various technologies. The set of principles for gearing
up, meeting goals, and winding down projects to completion in this complex environment is called project
management.
Modern-day examples of projects include (1) physical construction, such as building bridges or industrial
plants; (2) changes in organizational culture, like adopting participative management; and (3) undertakings
with mixed objectives, such as putting in a new system that requires both physical adjustment (new layout and
hardware installation) and changes in the way people perceive and perform their tasks. Exhibit 2-1 shows the
type of project that executives may have to deal with, whether their primary function is managing projects or
not.
In general management, just as in project management, goals also have to be met. The complexity of tasks,
external environment, and time pressure make many activities appropriate for project management
applications. Since project management is, by nature, aimed at managing change, executives in general
management positions can gain from using a project approach. If, then, overall management can be divided
into (1) managing the status quo (operational management), and (2) managing change (project management),
and if change is happening at an increasing pace, project management principles must inevitably become a
bigger part of the overall management picture. Exhibit 2-2 shows the relationship between ongoing
management and project management concepts.
This chapter was adapted from Paul C. Dinsmore, &$147;Ideas, Guidelines and Techniques for Applying Project Management
Solutions in the General Business Arena: Lessons for Executives.” Reproduced by permission of Butterworth-Heineman
Limited, Oxford, United Kingdom, from The International Journal of Project Management, Volume 8, February 1990, pp.
33-38.
Exhibit 2-1. Range of projects.
2. The executive as project sponsor or other major stakeholder in relation to a conventional project.
Greater knowledge of project principles can help executives interact more effectively with
project-oriented efforts within the company. Nonproject management executives may find themselves
sponsoring a project or participating on a project management board for a conventional project related
to their area. Or, other projects under way may overlap with the executive’s area of responsibility.
Both situations are examined in this chapter. First, we look at the executive who manages a project within his
or her area of responsibility, taking on the role, if not the title, of project manager. We then examine the
executive who is sponsoring a project or is involved in a situation where there is overlap into the executive’s
territory.
The Executive as Project Manager
For starters, the executive acting as project manager needs to be aware of the basis of project management.
Lesson 1 provides a set of project management commandments that summarizes the fundamentals for
managing projects.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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These ten commandments summarize the recommended managerial posture for administering projects.
1. Concentrate on interfacing. Many projects involve interacting with other areas where the lines of
interface are fuzzy. This calls for boundary spanning, involving both defining frontiers and making
-----------
efforts at bridge building.
2. Organize the project team. If the project is going to involve a number of people, pick team members
carefully, then motivate and integrate them. Test leadership abilities and delegate as much as possible.
3. Plan strategically and technically. Use a top-down planning approach, starting with overview
thinking and then moving into details. Establish both what has to be done and how these planned tasks
are to be accomplished. Break the project down into component parts using a work breakdown structure
or other project logic.
4. Remember Murphy’s Law. According to Murphy, “If anything can go wrong, it will.” Strategies,
plans, and systems should be tested to ensure fail-safe implementation. Don’t leave the door open for
Murphy to prove his theory.
>5. Identify project stakeholders. Who are the interested parties who will influence important project
decisions? Determine who has a stake in project outcome (clients, users, managers, financiers, suppliers
of technology, higher management), and devise systems for involving and satisfying their needs.
6. Be prepared to manage conflict. In situations that involve people and change, conflict is inevitable.
In managing projects, effectively dealing with conflict may be instrumental in reaching proposed goals.
Use conflict management techniques: negotiate when interests clash, promote collaboration when
talents and capabilities are complementary, force the issue when important principles are at stake, and
finally, set off conflict if necessary to meet project goals.
7. Expect the unexpected. Reducing the unexpected helps keep projects on track. In project
environments, surprises can be warded off by participative planning, contingency allowances, judicious
use of expert opinion, and statistical comparisons with similar prior projects.
8. Listen to intuition. Intuition is a subjective form of processing information. While it may not be
entirely logical, it reflects the gut feeling formed by the experiences logged over the years. Intuition,
therefore, should be one of the components used in making decisions on projects.
9. Apply behavioral skills. Projects are developed and carried out by people. Therefore, in the
change-oriented project environment, behavioral influences may be substantial. Remember that
resistance to change is a human characteristic. Work on integrating the project team, and try to foresee
eventual people problems.
10. Follow up and take corrective action. The counterpart of planning is control. Set up a system for
measuring progress, then evaluate that progress against initial plans and take corrective action.
In actual practice, dozens of planning and control documents and instruments are needed to complete projects
successfully. For complex projects, the types of documents may number in the hundreds. The minimum
needed to structure most projects is summarized in the two strategic-type plans shown below: the project
management plan, and the project plan.
Project Plan
The project plan provides a macro view of what is to be done. This plan is aimed at summarizing the project
itself, as opposed to the project management plan, which condenses the proposed managerial philosophy.
Here are some of the cornerstones of the project plan.
• Scope summary. This summary reflects the essence of the project and defines project boundaries and
interfaces. Objectives, goals, time, cost, and quality should all be dealt with in the scope summary.
• List of documents to be issued. To comprehend scope and time fully, a listing is needed of major
documents such as drawings, specifications, requisitions, plans, and schedules.
• Contracting plan. When the project involves subcontracting vendors to supply equipment, materials,
and/or services, a contracting plan is needed to define the work packages and how they will be handled.
• Work plan. In this section the physical work is described in terms of what is to be done and how it is
to be done.
• Master schedule. This schedule demonstrates the time relationships between project activities,
usually in bar chart form.
• List of standards and procedures. This outlines the managerial and technical rules of the game. These
are determined by the standards that are chosen or especially prepared for the project.
• Budget and cost control system. This section describes budgeting and cost criteria and outlines cost
codes and reporting periods.
• Project breakdown structure and precedence diagramming. Here the project is broken down into
convenient work packages, and the sequential interrelationship is established between tasks and
activities.
• Equipment and materials lists. These lists summarize the material components required to make the
project a reality.
• Detailed management plan. Organizational structures, job descriptions, and administrative flow
diagrams are the focus of this detailed version of the project management plan.
• Communications. In this section, all formal communications channels are established among client,
contractors, managers, joint venture partners, etc.
Once the project plan and the project management plan have been outlined the project foundations have been
set firmly in place. On top of this base, the remaining managerial actions can be taken with reasonable
probability of success.
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The process of preparing the two plans mentioned above may be as important as the plans themselves.
Involving those who are going to be responsible for project implementation in the planning effort pays
dividends in terms of better decisions, higher motivation, and a “buy-in” to the plan that results from
----------- participative approaches.
The Japanese are masters at participative planning. They have demonstrated convincingly that integrated
participative planning increases overall effectiveness and reduces implementation time. In spite of potential
bogdowns at the beginning of the project, the slower start is offset by the natural synergy and capacity for
foreseeing problems that grow out of the process. In other words, the process of planning can be as important
as the plan itself. As Exhibit 2-3 shows, progress is made more quickly on projects utilizing participative
planning rather than traditional planning.
This Japanese participative planning concept has spilled over to the Western world both in project
applications and in traditional production-related efforts. A case in point is the simultaneous planning
approach being used by U.S. auto makers for creating and launching new models. (General Motors uses the
term “simultaneous engineering,” Ford calls it the “team concept,” and Chrysler applies “process-driven
design.”) The change came when U.S. auto makers discovered that their segmented approach to dealing with
new models (planners plan, finance managers finance, engineers engineer, and sellers sell) led them to a
concept-to-market time period of fifty-four months, which is long enough for consumers’ tastes to change.
Meanwhile, their Japanese counterparts could go from start to finish in as little as thirty-six months. Now the
U.S. industry, by changing its approach to one involving simultaneous planning, aims to whittle down the
cycle substantially and close the competitive gap.
Two significant changes are apparent when comparing the new Detroit planning format against traditional
sequential approaches.
1. The new car model effort came to be seen as an integrated project requiring strong organizational
interfacing.
Exhibit 2-3. Project progress with traditional planning vs. participative planning.
2. Planning became a participative effort, actively involving all stakeholders in the project.
Planning, then, is a major key to managing projects successfully. The plan itself, in terms of content and form,
is a part of that success. Equal emphasis, however, needs to be given to the involvement of the stakeholders.
The result is a better plan with greater probability for successful implementation.
Since projects evolve through a life cycle, management efforts require adaptation to each of the project’s
phases. Beginning a project calls for conceptual thinking. The development stage requires resource planning.
The implementation phase calls for organization and productivity in carrying out the proposed work. Finally,
termination involves wrapping up, reviewing, and turning over the completed project (facility, product,
system, or service) to the user. Exhibit 2-4 shows the types of activities normally performed during each
phase.
The most important concept for executives to remember in relationship to the life cycle is that each phase
calls for a specific managerial approach. Successful project managers know how to shift gears from one stage
to the next, starting off reflectively, moving into resource planning, then to the hands-on managing of actual
implementation, and finally putting on pressure to bring the venture to a close.
Exhibit 2-4. Typical activities during phases of the project life cycle.
The project manager and team are stakeholders since their competence, as seen by others, is tied to successful
termination of the project. Others that stand to gain or lose are clients and end users, functional managers,
technology suppliers, and joint-venture partners. Another major stakeholder is the project sponsor.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title Ultimate responsibility for project success usually resides with the project sponsor, although the day-to-day
burden is carried by the project manager. The sponsor is often the person or group to whom the project
manager reports within the parent organization, although in some cases, a matrix or other corporate
relationship may exist. The sponsor generally assigns the project manager to the task and relieves that
manager if necessary. The project sponsor’s function is to provide support, nurture high-level contacts, and
----------- monitor the project’s overall performance. Here are some hints for executives who find themselves acting as
project sponsors.
• Make sure to have a “contract” with the project manager. If both parties have worked together in the
past and know one another’s thinking patterns, fine. If not, spend time discussing the major issues. Use
a review of the project manager’s job description to see if both parties understand the job the same way.
• Get involved in the strategic project planning. Make sure that the project manager starts the project
by involving the major stakeholders in the planning process. Give personal input and guidance during
the initial planning stages.
• Provide support for the project manager at upper levels. For the project manager to work
productively, he or she needs to be able to concentrate on daily management chores.
• Establish periodic formal review meetings with the project manager. In addition, keep channels open
for informal communication.
• Since most competent project managers cannot simply be told what to do, think of yourself as the
project manager’s mentor: plant ideas, make suggestions, question points. Help the project manager see
the big picture.
Clients or end users have a major stake in the final outcome of a project, but in many cases they are not
responsible for the implementation phase. Yet they must live with the end result and operate it. Here are some
ideas to help executives who are clients or end users.
• Try to influence the choice of the project manager. The manager will naturally be more acceptable to
you if you have been involved in the matter. If the project manager has already been indicated, make it
a point to establish as close a relationship as possible with that person.
• Since client/project team roles are often conflictive in nature, do your part to reduce the tension.
Recognize the difficulties, avoid being destructively critical, and be supportive whenever possible.
• Negotiate periodic formal contacts with the project team, and establish jointly acceptable procedures
regarding approvals, design freeze criteria, preoperational activities, etc.
• Look ahead. Try to fix criteria and procedures that will reduce potential problem areas.
Other stakeholders, such as functional managers, also need to be aware of how they can best fit into the
project picture. Here are some suggestions.
• Since one’s capacity is a technical or support function, take advantage of the dynamics of the project
organization to channel subjects that need action.
• Recognize the inherent conflict between functional groups (let’s make sure we get it right) and
project teams (let’s get on with the job). Avoid interpreting conflictive situations as personal attacks.
• Insist on becoming involved in the planning stages that require using resources for which you are
personally responsible. Give realistic time estimates.
• Participate in establishing procedures for project activities that involve personnel. Make suggestions
and take initiative to ensure that policies are fixed before the action starts.
For other stakeholders, such as joint-venture partners, suppliers of proprietary technology, development
agencies, and financing institutions, here are some general guidelines.
• Get it in writing. Personal rights and responsibilities must be clearly fixed in formal documents to
enable a claim on one’s stake in the project to be realized.
• Remember that having it in writing isn’t enough. Those who negotiate projects are often not those
who implement them. Therefore, get involved with the project team, at least at the strategic planning
level, to ensure that your interests are being cared for.
• Don’t overdo it. Recognize the limits of your claim on the project. Let other people do their jobs,
even if they don’t do things exactly the way you would prefer.
• Establish and follow through on a periodic review procedure that guarantees your right to monitor the
project.
One way for stakeholders to be represented adequately is through a project management council or steering
committee. In the council meetings, the stakeholders are given a formal overview of project status, usually
presented by the project manager, and then invited to participate in discussions regarding future trends.
Project management council meetings are generally held quarterly, but depending on the size and time frame
of the project, their frequency can be adjusted to meet project needs.
Initiative for forming the council is taken by the project manager and/or the project sponsor, who invites the
members in an effort to involve and garner support from the project stakeholders. Here are examples of
members of possible different project management councils.
• Council No. 1. Director of engineering, project manager, chief purchasing agent, outside consultant,
head of production department, and chief of contracts and corporate investments.
• Council No. 2. Head of systems department, group leader, head of financial department, chief analyst,
and third-party vendor of principal hardware and software.
• Council No. 3. Executive vice-president, head of project management, project manager, manager of
finance, administrative manager, special assistant for operations, and joint-venture partner.
Conclusion
Executives face the challenge of adopting new management practices to meet the demands placed on business
by the changing world. The new practices must include approaches that provide timely and cost-effective
responses. The set of principles geared to reaching goals on schedule and within budget is labeled project
management.
General management is moving more and more toward project management. Executives are expected to be
managers of change, and managing change is what project management is all about. Modern-day executives,
who are looked to as change managers, and who will also be exposed to conventional project work, can
greatly increase their effectiveness by adding to their general management skills the dynamics of handling
change through project management.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
AMACOM Books
ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 3
Developing a Project Management Body of
-----------
Knowledge
Alan M. Stretton
University of Technology
The Project Management Body of Knowledge is central to the main thrust of PMI’s professionalization
program, which is aimed at a worldwide audience. This is tackling the “reinventing the wheel” problem on a
grand scale! Some of the material in this chapter derives from the experiences of many members of the
Project Management Institute, including the author, in the ongoing development of the PMI’s PMBOK. (It
should be emphasized that opinions and interpretations in this chapter are the author’s alone and do not
represent official policy or viewpoints of the Project Management Institute.)
The Framework is a special area concerned with tying together all sections of the PMBOK. This has
developed from simply a collection of the PM Functions, through two-dimensional matrix forms, toward a
three-dimensional matrix format. The two-dimensional matrix form has the Basic PM Functions on one axis
and the Integrative PM Functions on the other. The idea behind this matrix is expressed in the PMBOK as
follows:
At each intersection in the body of the matrix is a “box” defined by the two dimensions of the
matrix. Each “box” or block of knowledge consists of the relevant knowledge, skills, processes,
activities, techniques, and tools consistent with the particular dimensions. Thus, individual
blocks of knowledge can be clearly defined, and interrelationships or overlaps between them can
be readily identified.6
This idea has proved to be less productive than was originally expected. A suggested extension to this matrix,
in the form of a third dimension consisting of the Project Life Cycle, appears to offer greater potential as an
integrative framework for all components of the PMBOK. This is because all projects are progressed through
a Project Life Cycle, which thus represents a major common baseline linking all projects for both practical
and educational purposes. Exhibit 3-2 shows the three-dimensional PMBOK Framework model. As with the
PMBOK itself, the Framework will continue to evolve. Its importance lies in the help it should give in tying
together all components of a PMBOK into a coherent whole, particularly in view of the shortage of such
integrative models.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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The treatment of each of the PM Functions in the PMBOK follows a thematic pattern. First, there is a
discussion of the main features of the function. This is followed by a Function Chart, which is a detailed work
breakdown structure into the function’s component processes, activities, and relevant techniques. This is in
----------- turn followed by a function Impact Matrix Chart, which shows how each of the function’s primary processes
(from the Function Chart) impacts on each of the other PM Functions. Finally, there is a Glossary of Terms
for each PM Function, covering each of the processes, activities, and techniques in the Function Chart.
Basic PM Functions
The Basic PM Functions are the management of scope, quality, time, and cost. (They are also varyingly
described as “constraints,” “restraints,” or project “elements” in the PMBOK and elsewhere.) Scope, quality,
time, and cost also represent the basic objectives that apply to all projects. The dual nature of these four Basic
PM Functions was pointed out in the PMBOK’s predecessor, the “ESA Report”: “The management of cost,
time, scope, and quality are, in addition to being functions, also objectives to be attained within a project. . . .
Cost, time, scope, and quality have a duality of character in that they are both functions and objectives.”7
Although it is common usage to talk about “managing” scope, quality, time, and cost, it is worthwhile
stopping for a moment to think about what these processes actually involve. Time management is a good
example. In the literal sense, no one can actually manage time. Time management means the management of
those project activities that are most relevant to the achievement of the project’s time objectives. Similar
comments apply to the other Basic PM Functions. What is involved in the management of scope, quality,
time, and cost?
An examination of the Function Charts of each of these functions reveals some consistent patterns. (For the
present purpose, we exclude the managerial component of quality management—i.e., the quality of human
performance—and consider only the technical quality component.) The relevant primary processes are shown
against each of the Basic Functions in Exhibit 3-2. Specifically, it can be seen that the primary processes of
each of the four Basic PM Functions fit reasonably well into the typical project sequence for planning
(including estimating and scheduling) and controlling (including reporting and progress reviews).
Now, it is common for books and articles on project management to focus primarily on planning and control
activities, either as the core of project management in their own right, or as part of the four “classical”
management functions of planning, organizing, leading (the human aspect), and controlling. However,
PMBOK has chosen a different primary focus. It has separated out the primary project objectives of scope,
quality, time, and cost and has separately nominated the corresponding managerial functions which are most
directly concerned with their achievement. These heavily involve planning and controlling processes, which
also apply to some of the other PM Functions, to which we now turn.
Integrative PM Functions
The Integrative PM Functions are the management of risk, human resources, contract/procurement, and
communications. As the PMBOK states, these “integrative project management functions are quite
independent of, and cut across, all these basic functions.”8
There are three further functions that feature significantly in the PMBOK, namely the management of
planning and control, management of project integration, and management of resources. These are included in
Exhibit 3-2 but are not fully discussed as project management functions in their own right in the PMBOK.
On the basis of the above discussion on the Basic PM Functions, it is clear that planning and control are
independent of the basic functions. Indeed, these processes not only apply to the basic functions but are
clearly relevant to other integrative functions as well. However, all three of these additional functions have
attributes that would be regarded as integrative in the normal usage of the word, and on that basis they would
qualify for more detailed treatment in the PMBOK. This suggests the more general question, which frequently
arises, as to just which functions should be included in a generic PMBOK.
One example of the types of questions to be resolved is instanced by the author’s experience in managing
R&D projects in which there were no contract/procurement activities whatever. Should this PM Function
therefore be dropped from a generic PMBOK? More specifically, should we adopt a purist approach and
exclude from a generic PMBOK any PM Function for which we find even one project where it is not
applicable? Such an approach would appear to be basically counterproductive, as the usefulness of a PMBOK
for both educators and practitioners could be substantially, or even dramatically, reduced.
Should we then adopt the opposite approach and include all potential candidates in a checklisting mode, so
that those which do not apply for a particular application area can then be simply struck off? The problem
with this approach is that such a list could be virtually never-ending, with attendant dangers of unbalancing
and/or trivializing a PMBOK.
A third possibility, which is being adopted by PMI, is to include those PM Functions which are (agreed to be)
common to most projects in most application domains. This approach could introduce some problems in
deciding about specific inclusions and exclusions, because most is rather an elastic term. However, such
potential problems would appear to be a small price to pay for increasing the usefulness of the PMBOK.
Dealing with such problems of choice may also help ensure that the PMBOK remains dynamic and current.
The above discussion also suggests that there is a need for PMBOKs that are specific to particular industries,
technologies, or other application areas, and we now turn to this topic.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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Most project managers operate within a particular industry and/or technology. The knowledge that is most
-----------
relevant to them at any stage is that which is directly related to their current industry/technology. Indeed, it
appears that much of the ongoing education in project management is done as a component of broader
industry/ technology-specific educational efforts. These include formal educational programs, such as
engineering and other applied science degree programs, and continuing education programs, whether run by
educational institutions, industry bodies, or individual organizations.
Thus, in many industries/technologies there is already a wealth of project management material, but this is
often heavily intertwined with technical or other such materials particular to that area. One of the challenges
for developers of industry/technology-specific PMBOKs is to isolate and extract the specific project
management components.
Substantial bodies of knowledge have already been extracted in some areas, but there is also a good deal of
material that is still “locked up” within individual organizations and therefore is not yet available to wider
audiences. Academics often obtain some access to these materials and incorporate them in their writings.
Other avenues for widening the availability of such materials need to be found.
An even greater challenge faces those working in industries and/or technologies that have only recently
adopted the project approach to undertaking tasks. These groups will no doubt wish to develop their own
domain-specific bodies of knowledge as soon as practicable, and they should be strongly supported in such
efforts.
In the meantime, project managers in new application domains have only the more generic materials to fall
back on to help develop their skills, and this is one very important reason why the generic PMBOK should
continue to be developed.
There is also a kind of “halfway house” approach that is currently being pursued by the PMI. It would appear
that many different industries and technologies share many common project management activities. For
example, such activities as engineering/ design, construction, and R&D are typically undertaken on a project
basis in a wide variety of industries and technologies. There seem strong grounds for believing that each such
set of project activities is carried out in a broadly similar way, irrespective of the particular industry or
technology in which it is undertaken.
If it is so, then the codification of these shared domain-specific bodies of knowledge would offer considerable
detailed help to a wide range of project managers in many industries and technologies. The PMI is actively
pursuing the development of such bodies of knowledge, starting with the assembly of relevant case materials.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Section II
Managerial Strategies for Starting Up Successful
-----------
Projects
Chapter 4
Strategies for Managing Major Projects
Peter W. G. Morris
Bovis Ltd.
The way one sets up a project largely determines how successful it will be. The crucial point about the model
presented in this chapter is that all the items must be considered from the outset if the chances of success are
to be optimized. The project must be seen as a whole, and it must further be managed as a whole as it is
implemented. While this chapter is directed toward the management of large, broad, community-based
projects, the same principles apply, on a lesser scale, to nonmajor projects.
The strategic model for managing projects discussed in this chapter is shown in Exhibit 4-1. Its logic is
essentially as follows:
• The project is in great danger of encountering serious problems if its objectives, general strategy, and
technology are inadequately considered or poorly developed, or if its design is not firmly managed in
line with its strategic plans.
• The project’s definition both affects and is affected by changes in external factors (such as politics,
community views, and economic and geophysical conditions), the availability of financing, and the
project duration; therefore, this interaction must be managed actively and well. (Many of these
interactions operate, of course, through the forecasted performance of the product or products that the
project delivers once completed.)
• The project’s definition; its interaction with these external, financial, and other matters; and its
implementation are much harder to manage and quite possibly damagingly prejudiced if the attitudes of
the parties essential to its success are not positive and supportive.
• Realization of the project as it is defined, developed, built, and tested involves:
• Deciding the appropriate project-matrix-functional orientation and balancing the involvement of the
owner, as operator, and the project implementation specialists
• Having contracts that reflect the owner’s aims, which are motivational, and that appropriately reflect
the risks involved and the ability of the parties to bear these risks
Project Definition
The project should be defined comprehensively right from its earliest days in terms, for example, of its
purpose, ownership, technology, cost, duration and phasing, financing, marketing and sales, organization,
energy and raw materials supply, and transportation. If it is not defined properly “in the round” like this from
the outset, key issues essential to its viability could be missed or given inadequate attention, resulting in a
poor or even disastrous project later.
Objectives
The extent to which the project’s objectives are not clear, are complex, do not mesh with longer-term
strategies, are not communicated clearly, or are not agreed upon, compromises the chances of project success.
The Apollo program, which placed the first man on the moon, was technically extremely difficult but its
chances of success were helped immeasurably by the clarity of its objective.
It is interesting to compare the Apollo program with U.S. plans for a permanent, manned space station
orbiting the earth. The space station objective is superficially clear—in President Ronald Reagan’s words, “to
develop a permanently manned space station and to do it within a decade.” But the objective is in fact far
from clear. What, for example, does develop really mean? Just design and construct? Surely not. And what is
the station’s real mission—and hence, what is the project’s proper development strategy? Earth observation?
A way station to planetary observation? Microgravity and other experimental purposes? Or a combination of
these? The space station example illustrates that project, or program, objectives should match with viable
long-term strategies, otherwise there will be confusion, uncertainty, changes, cost increases, and delays—as
there indeed have been in the prolonged effort to establish a permanent manned space station.
Strategy
Strategies for the attainment of the project objectives should similarly be developed in as comprehensive a
manner as possible, right from the outset. This means that at the prefeasibility and feasibility stages, for
example, industrial relations, contracting, communications, organization, and systems issues should all be
considered, even if not elaborated upon, as well as the technical, financial, schedule, and planning issues.
Some of the most valuable work on the need for comprehensive planning has come from the areas of R&D
and new product development. Valuable work has also been done with regard to development aid projects.
Hirshman’s 1967 Development Projects Observed, for example, was one of the first writings explicitly to pull
the “project success’” question into project management.1 The 1980s insights of Cassens, Moris, and Paul
encapsulate almost everything anyone of good sense would expect regarding what it takes to produce
successful development projects.2 The writings of Cooper, Manfield, and others on new product development
similarly relate product implementation performance to environmental and market success.3
Technology and Design
The development of the design criteria and the technical elements of the project should be handled with the
utmost care. The design standards selected affect both the difficulty of construction and the operating
characteristics of the plant. Maintainability and reliability should be critical factors in determining the
project’s operating characteristics. Many studies have shown that technical problems have a huge impact on
the likelihood of project overrun4: Thorough risk analysis is therefore essential. The rate of technological
change in all relevant systems and subsystems should be examined; technology must be tested before being
designed into production (as opposed to prototype) projects; design changes should be kept to an absolute
minimum.
No design is ever complete; technology is always progressing. A central challenge in the effective
management of projects is thus the conflict between meeting the schedule against the desire to get the
technical base that fits better. The orderly progressing of the project’s sequence of review stages—the level of
detail becoming progressively tighter, with strict control of technical interfaces and of proposed changes
(through configuration management)—is now a core element of modern project management.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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Title Projects as widely different as weapons systems, process plants, and information systems now generally
employ project development methodologies that emphasize careful, discrete upgradings of technology;
thorough review of cost, schedule, and performance implications; and rigorous control of subsequent
proposed changes. (Civil engineering and building, however, because of the split between design and
construction still common in the United Kingdom, alone of today’s major project-based industries, still tend
----------- not to have design management practices as a typically central part of the evolving total project management
process.)
A major issue in project specification is how great a technological reach should be aimed for without
incurring undue risks of cost overruns, schedule slippages, or inadequate technical performance. Up until
about the 1980s this was perhaps the most difficult issue to get right on projects. During the 1980s, however,
practice got better (though there have still been some spectacular disasters), partly because our basic
technologies are not progressing into new domains at quite the rate they were before, but also partly because
of the greater caution, care over risk assessment, use of prototypes, etc., which is now more common project
practice. It is barely conceivable that we should embark on a brand new nuclear power reactor (AGR) or
aerospace project (Concorde) today with the bravura that we did twenty to twenty-five years ago.
In setting up projects, then, care should be taken to appraise technological risk, prove new technologies, and
validate the project design, before freezing the design and moving into implementation.
Project personnel have had notable difficulty in recent years recognizing and dealing with the project’s impact
on the physical and community environment and, in consequence, managing the political processes that
regulate the conditions under which projects are executed. Most projects raise political issues of some sort and
hence require political support: moral, regulatory, and sometimes even financial. National transportation
projects, R&D programs, and many energy projects, for example, operate only under the dictate of the
politician. The civil nuclear power business was heavily pushed politically. Third World development projects
are especially prone to political influence. Even where the public sector is supposedly liberated to the
private—as in build-own-operate projects—political guidance, guarantees, and encouragement are needed.
Do nonmajor projects also need to be conscious of the political dimension? Absolutely. Even small projects
live under regulatory and economic conditions directly influenced by politicians; intraorganizationally, too,
project managers must secure political support for their projects.
The important lesson therefore is that these political issues must be considered at the outset of the project. The
people and procedures that are to work on the project must be attuned to the political issues and ready to
manage them. To be successful, project managers must manage upward and outward, as well as downward
and inward. The project manager should court the politicians, helping allies by providing them with the
information they need to champion his or her program. Adversaries should be coopted, not ignored. (The
environmental impact assessment process, which will be described shortly, is showing how substantive
dialogue can help reduce potential opposition.)
Although environmentalism has been seriously prejudicing project implementation since the 1960s, most
project personnel ignored it as a serious force at least until 1987-1988, when a number of world leaders, the
World Bank, and others began to acknowledge its validity. Now, at last, most project staff members realize
that they must find a way of involving the community positively in the development of their project. Ignoring
the community and leaving everything to planning hearings is often to leave it too late. A “consents strategy”
should be devised and implemented.5 Dialogue must begin early in the project’s development.
In a different sense, getting the support of the local community is particularly important in those projects
where the community is, so to speak, the user—as, for example, in development projects and information
technology. The local community may also be the potential consumer or purchaser for the project. Doing a
market survey to see how viable the project economics are is thus an essential part of the project’s
management.
Changes in economic circumstances affect both the cost of the project’s inputs and the economic viability of
its outputs. The big difference today compared with twenty years ago is that then we assumed conditions
would not vary too much in the future. Now, after the economic dislocation of the 1970s and 1980s, we are
much more cautious. As with technology, then, so with economics: We should be more cautious in appraising
and managing our projects today.
In the area of cost-benefit discounting and other appraisal techniques, practice has moved forward
considerably over the last few years. Externalities and longer-term social factors are now recognized as
important variables that can dramatically affect the attractiveness of a project. The basic project appraisal
techniques of the 1960s have now been replaced with a broader set of economic and financial tools arrayed, in
the community context with the use of environmental impact assessment procedures.
Initially resisted by many in the project community, the great value of environmental impact assessment
(EIA) is that it (1) allows consultation and dialogue between developers, the community, regulators, and
others; and (2) forces time to be spent at the front end in examining options and ensuring that the project
appears viable. Through these twin benefits the likelihood of community opposition and of unforeseen
external shocks arising is diminished. Further, in forcing project developers to spend time planning at the
front end, the EIA process emphasizes precisely the project stage that traditionally has been rushed, despite
the obvious dangers. We all know that time spent in the project’s early stages is time well spent—and
furthermore, that it is cost effective time well spent—yet all too frequently this stage is rushed.
Finance
During the 1980s there was a decisive shift from public sector funding to the private sector. There is a belief
that projects built under private sector funding inevitably demonstrate better financial discipline. This is
doubtless true where projects are built and financed by a well-managed private sector company. But private
financing alone does not necessarily lead to better projects (as the record of Third World lending in the 1970s
shows: weak project appraisals, loan pushing, cost and schedule overruns, white elephants, etc.). What is
required is funding realism. The best way to get this is by getting all parties to accept some risk and to
undertake a thorough risk assessment. Full risk analysis of the type done for limited recourse project
financing, for example, invariably leads to better setup projects and should therefore be built into the project
specification process. The use of this form of funding in methods such as build-own-operate projects has had
the healthy consequence of making all parties concentrate on the continuing economic health of the project by
tying their actions together more tightly to that goal.
The raising of the finance required for the English Channel Tunnel from the capital markets in 1986-1987 is a
classic illustration of how all the elements shown in Exhibit 4-1 interact, in this case around the question of
finance. To raise the necessary 6 billion required that certain technical work be done, planning approvals be
obtained, contracts be signed, political uncertainties be removed, etc. Since the project was raising most of its
funding externally, there was a significant amount of bootstrapping required: The tasks could be
accomplished only if some money was already raised, and so on. Actions had to be taken by a certain time or
the money would run out. Further, a key parameter of the project’s viability was the likelihood of its slippage
during construction. A slippage of three to six months meant not just increased financing charges but the lost
revenue of a summer season of tourist traffic. The English Channel Tunnel thus demonstrates also the
significance of managing a project’s schedule and of how its timing interrelates with its other dimensions.
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Title Duration
Determining the overall timing of the enterprise is crucial to calculating its risks and the dynamics of its
implementation and management. How much time one has available for each of the basic stages of the
project, together with the amount and difficulty of the work to be accomplished in those phases, heavily
----------- influences the nature of the task to be managed.
In specifying the project, therefore, the project manager spends considerable effort ensuring that the right
proportions of time are spent within the overall duration. Milestone scheduling of the project at the earliest
stage is crucial. It is particularly important that none of the development stages of the project be rushed or
glossed over—a fault that has caused many project catastrophes in the past. A degree of urgency should be
built into the project, but too much may create instability.
It is best to avoid specifying that implementation begin before technology development and testing is
complete. This is the “concurrency” situation. Concurrency of course is sometimes employed quite
deliberately, to get a project completed under exceptionally urgent conditions, but it often brings major
problems in redesign and reworking. If faced with this, be under no illusion as to the risk. Analyze the risk
rigorously, work breakdown element by work breakdown element, milestone phase by milestone phase.
The concurrency situation should be distinguished from a similar sounding but in fact quite different “fast
build” practice. (This is sometimes also known as “fast track,” but others equate fast track with concurrency.
The terminology is imprecise and hence there is confusion—and danger—in this area.) Fast build is now
being used to distinguish a different form of design and construction overlap: that where the concept, or
scheme, design is completed but then the work packages are priced, scheduled, and built sequentially, within
the overall design parameters, with strict change (configuration) control being exercised throughout. With this
fast build situation, the design is secure and the risks are much less.
There are, in short, several lessons on how to deal with the challenge of managing urgent projects.
• Do not miss any of the stages of the project.
• Use known technology and/or design replication as far as possible; avoid unnecessary innovation.
• Test technology before committing to production (prototyping). Avoid concurrency unless prepared
to take the risk of failing and of having to pay for the cost of rework.
• Avoid making technical or design changes once implementation has begun. Choose design
parameters broad enough to permit development and detailing without subsequent change (fast build).
Exert strict change control/configuration management.
• Order long lead items early.
• Prefabricate and/or build in as predictable an environment as possible and get the organizational
factors set to support optimum productivity. Put in additional management effort to ensure the proper
integration at the right time of the things that must be done to make the project a success: teamwork,
schedule, conscious decision making, etc.
Each of these areas, then—external factors, finance, and duration—is both affected by and affects the viability
of project definition. They must all be managed by the project executive. They must then be implemented
through the project’s life cycle.
Attitudes
Implementation can be achieved effectively only if the proper attitudes exist on the project. Unless there is a
major commitment toward making the project a success, unless the motivation of everyone working on the
project is high, and unless attitudes are supportive and positive, the chances of success are substantially
diminished.
It is particularly important that there be commitment and support at the top; without it the project is severely
jeopardized. But while commitment is important, it must be commitment to viable ends. Great leaders can
become great dictators. It is important, then, if sane, sensible projects are to be initiated, that they be not
insulated from criticism. Critique the project at its specification stage, therefore, and ensure that it continues
to receive objective, frank reviews as it develops.
Implementation
I have suggested that project management has in the past been concerned primarily with the process of
implementation. This is a pity since it implies that developing the definition of the project is somehow not
something that is the concern of the project’s manager. As the foregoing shows, this is absurd.
The key conceptual point is not only that the specification process must be actively managed, but that the
specification process must consider all those factors that might prejudice its success—not just technical
matters and economics, but also ecological, political, and community factors and implementation issues.
Organization
The two key organizational issues in projects are to decide the relevant project-matrix-functional orientation
and the extent of owner involvement. Both of these must be considered from the earliest stages of project
specification.
On the former, note that a full project orientation is expensive in resource terms and also that many projects
start and finish with a functional orientation but “swing” to a matrix during implementation.6 Note too that
implementing a matrix takes time and that effort must be put into developing the appropriate organizational
climate. Assistance from the area of organization behavior therefore should be considered when designing and
building a matrix organization. (Indeed, this is also true for other forms of project organization.)
The crucial issues as regard the extent of owner involvement are the extent that the owner does not (1) have
the resources, or (2) the skills, outlook, or experience, but (3) has legal or moral responsibility for assuring
implementation of satisfactory standards. The first constraint is the most common. In building and civil
engineering, for example, because of the nature of the demand, the owner rarely if ever has sufficient
resources in-house to accomplish the project. Outside resources—principally designers, contractors, and
suppliers—have to be contracted in. The owner, quite properly, focuses more on running the business.
Yet some degree of owner involvement is generally necessary. For if no project management expertise is
maintained in-house, then active, directive decision making of the kind that projects generally require is not
available. On the other hand, if operators who are not really in the implementation business get too heavily
involved in it, then there is a danger that the owner’s staff may tinker with and refine design and construction
decisions at the expense of effective project implementation. The solution to this dilemma is not an easy one
to determine. There is in fact no standard answer. What is right will be right for a given mix of project
characteristics, organizations, and personalities.
The key point, ultimately, is for owner-operators to concentrate on predetermined milestone review
points—the key markers in the project’s development at which one wants the project to have satisfactorily
reached a certain stage—and to schedule these properly and review the project comprehensively as it passes
across each of them. Milestone scheduling by owners is in fact now much more accepted as appropriate rather
than the more detailed scheduling of the past.
Contract Strategy
The degree of owner involvement is clearly related to the contractual strategy being developed. It is now
generally recognized that the type of contract—essentially either cost reimbursable or incentive (including
fixed price)—should relate to the degree of risk the contractor is expected and able to bear. If the project
scope is not yet clear, it is probably better not to use an incentive or fixed price type contract: The contract can
be converted to this form later. Contracts should be motivational: Top management support and positive
attitudes should be encouraged.
The parties to a contract should put as much effort as possible as early as possible into identifying their joint
objectives: It is better to spend longer working out how to make the contract a success than how to “do down”
the other party. And while competitive bidding is healthy and therefore to be encouraged, adequate time and
information must be provided in order to make the bid as effective as possible. Spend time, too, ensuring that
the bases upon which the bid is to be evaluated are the best: Price alone is often inadequate.
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Projects generally demand extraordinary effort from those working on them, often for a comparatively modest
financial reward with the ultimate prospect of working oneself out of a job! Frequently, significant
institutional resistance must be overcome in order for the many factors here being listed to be got right—or
----------- anything like right. This therefore puts enormous demands on the personal qualities of all those working on
the project, from senior management through the professional team(s) to the work force.
The different roles of project manager, leader, champion, and sponsor should be distinguished, as shown in
Exhibit 4-2. Each is needed throughout the project, but the initial stages particularly require the latter three.
Beware of unchecked champions and leaders, of the hype and overoptimism that too often surround projects
in their early stages. The sponsor must be responsible for providing the objective check on the feasibility of
the project.
Exhibit 4-2. Leadership roles in projects.
Project Manager: A manager is someone who gets others to do what he or she is not able
to do alone. A project manager manages resources to achieve success, as
defined principally by his or her “boss” or “client.”
Leader: A leader is someone who gets people to follow him or her.
Project Champion: A champion promotes something. The project champion has an
extremely important role early in the project, particularly in ensuring the
project receives the attention and resources it needs in order to survive.
Championship need not necessarily correlate with a successful project,
and a project champion may or may not be knowledgeable on project
management.
Project Sponsor: A sponsor is the provider of resources. The sponsor must ensure the
project makes operational sense once it is completed. He or she should
be familiar with project management but the management of the project
per se is not his or her remit. The sponsor is preeminently the guardian
of the “business case.”
We should recognize the importance of teamworking, of handling positively the conflicts that inevitably arise,
and of good communications. Consideration should be given to formal start-up sessions at the beginning of a
team’s work (mixing planning with team building). The composition of the team should be looked at from a
social angle as well as from the technical: People play social roles on teams and these must vary as the project
evolves.
All projects involve conflict: Cost, schedule, and technical performance are in conflict. However, conflict can
be used positively as a source of creativity. Conflict is managed in this way on the best projects. On some
projects it is ignored or brushed over: at best, a creative tension is then lost; at worst, it becomes destructive.
Every effort should be made to plan for improved productivity and industrial relations. The last twenty years
have seen considerable improvements in industrial relations, though much remains to be done. Productivity
improvements still represent an area of major management attention. Total quality management (TQM), with
its emphasis on determining real needs and of improving performance “continuously,” has perhaps been one
of the most potent concepts in this regard in recent years.7
Plans should be prepared by those technically responsible for them and integrated by the planning and control
group. Planning initially should be at a broad systems level with detail being provided only where essential
and in general on a rolling wave basis. Similarly for cost: Estimates should be prepared by work breakdown
element, detail being provided as appropriate. Cost should be related to finance and be assembled into forecast
out-turn cost, related both to the forecast actual construction price and to the actual product sales price.
Implementation of systems and procedures should be planned carefully so that all those working on the
project understand them properly. Start-up meetings should develop the systems procedures in outline and
begin substantive planning while simultaneously building the project team. (A word of systems caution: It is
vital that attention be given to managing the plant computer systems. There have been some spectacular cases
recently of plant hardware being complete but the plant being unable to start up because the computer systems
had not been managed as effectively as the rest of the project.)
The difficulty with project management is that it can encompass such a broad scope of services in different
situations. The project manager for an equipment supply contractor on a power station, say, has a more
narrowly defined task than the utility’s overall project manager. The project manager for the specification,
procurement, and installation of a major telecommunications system has a much broader scope than the
project manager of a software development program. Yet all involve the elements of Exhibit 4-1 in some way.
The two strategic questions for enterprises working in project-related industries are to determine:
1. The level and scope of services that one’s clients and customers need and are able to buy
2. Whether one has the organizational capability to supply this level and scope of services
There is little doubt that the most powerful set of ideas relevant to the first question—the level of services—is
that of total quality. The TQM concept forces one to analyze what services one’s clients want. (And there may
be several different sets of clients in the production chain ranging from one’s boss or bosses to, most
obviously, the people who are using the services, whether as customers or as colleagues.) This approach to
analyzing the effectiveness of one’s services is directly relevant to determining not just the extent to which the
factors identified in Exhibit 4-1 are needed but also the extent to which they need to be organized and
delivered in an integrated fashion.
As long ago as 1959, the Harvard Business Review identified integration as the key project management
function.8 The question is, however, what needs to be integrated? By fundamentally addressing the client’s
real needs and the extent to which these are being satisfactorily met, a project manager may see, for example,
that on this project the supply of finance, or the ability to provide better value for money, or to build faster, or
to provide greater technical reliability, are issues that need better integration within the scope of project
services to be provided.
As the level and scope of services become clearer, the second key strategic question arises: that of the
organization’s ability to deliver. Here, the principal difficulty is that our educational institutions are so far
producing people with either a severely limited number of the vision or the ability to manage such a broad
array of issues as those outlined in Exhibit 4-1. Few educational institutions have yet perceived that for
projects to be managed successfully, so wide a range of factors may need integrating. Even fewer have any
training across such a broad array, particularly in a project context. Yet there are signs that times are
changing, and it is surely very much in the interests of all who work in project-related industries to support
such change. Two items stand out as evidence of an increasing maturity in perceiving the breadth of
professional formation in the management of projects.
First, the certification process being initiated now by the professional project management societies in the
United States, the United Kingdom, and Australia are increasingly reflecting a broader “Body of Knowledge”
than that of mere “on time, in budget, to technical specification”—the traditional scope of project
management. Thus, the current Bodies of Knowledge put forth by the Project Management Institute in the
United States and the Australian Institute of Project Management are built around:
• Cost management
• Time management
• Scope management
• Human resources management
• Communications management
• Quality management
• Contract/procurement management
• Risk management
• Resources management
• Planning and control9
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Title The British project management society, the Association of Project Managers—whose certification program
is becoming the basis for that of the European INTERNET (the International Association of Project
Management)—has an even broader scope.10 This is shown in Exhibit 4-3. At last, then, the project
management societies are beginning actively to broaden their members’ perceptions of the fields in which
professional project managers should have competence.
-----------
The second evidence of an increasing maturity of project management formation is the growing number of
advanced project management educational programs, particularly at the postgraduate level. There are about
ten in the United Kingdom; as many in Australia; several in Germany, Holland, Italy, Scandinavia, Spain, and
France; and over thirty in the United States and Canada. Saudi Arabia, Singapore, and South Africa offer
programs too, as do Venezuela and Brazil, and no doubt several other countries.
Exhibit 4-3. Association of Project Manager’s Body of Knowledge
Conclusion
The message of this chapter is, in short, that a model for the strategic management of major projects does
exist. The framework sketched in Exhibit 4-1 indicates the main items that should be considered; the lessons
outlined in the second half of this chapter furnish the meat that goes on that framework. All the items
identified in Exhibit 4-1 should be considered from the earliest stages of the project and should be kept in
review as the project develops, receiving particular scrutiny at the major life cycle change points.
A fundamental task facing any senior manager on a major program or project is to work out how the various
factors identified in Exhibit 4-1 should best be allocated and integrated on his or her project. For managers
and educators, a major challenge facing the project management profession is to ensure that we have people
with the intellectual breadth and the experience to tackle issues of the diversity and subtlety of those so often
posed by today’s projects. Every encouragement should be given to the professional societies and the schools
and other organizations around the world to develop an appropriate, well-rounded professional formation for
the management of projects.
Notes
1. A. O. Hirschman, Development Projects Observed (Washington, D.C.: Brookings Institution, 1967).
2. R. Cassens and Associates, Does Aid Work? (Oxford, England: Clarendon Press, 1986); J. Moris,
Managing Induced Rural Development (Bloomington, Ind.: International Development Institute, 1981);
S. Paul, Managing Development Programs: The Lessons of Success (Boulder, Colo.: Westview Press,
1982).
3. N. R. Baker, S. G. Green, and A. S. Bean, “Why R&D Projects Succeed or Fail,” Research
Management (November-December 1986), pp. 29-34; R. Balachandra and J. A. Raelin, “When to Kill
That R&D Project,” Research Management (July-August 1984), pp. 30-33; R. G. Cooper, “New
Product Success in Industrial Firms,” Industrial Marketing Management 11 (1982), pp. 215-223; A.
Gerstenfeld, “A Study of Successful Projects, Unsuccessful Projects and Projects in Progress in West
Germany,” IEEE Transactions on Engineering Management (August 1976), pp. 116-123; E. Manfield
and S. Wagner, “Organizational and Strategic Factors Associated With Probabilities of Success and
Industrial R&D,” Journal of Business 48, No. 2 (April 1975); R. Whipp and P. Clark, Innovation and
the Auto Industry (London, England: Francis, 1986).
4. Ibid. See also F. P. Brooks, The Mythical Man-Month (Reading, Mass.: Addison-Wesley, 1982); T.
E. Harvey, “Concurrency Today in Acquisition Management,” Defense Systems Management Review 3,
No. 1 (Winter 1980), pp. 14-18; O. P. Karhbanda and E. A. Stalworthy, How to Learn From Project
Disasters (London, England: Gower, 1983); Learning From Experience: A Report on the Arrangements
for Managing Major Projects in the Procurement Executive (London, England: Ministry of Defense,
1987); E. W. Merrow, Understanding the Outcomes of Mega Projects: Quantitive Analysis of Very
Large Civilian Projects (Santa Monica, Calif.: Rand Corporation, March 1988).
5. B. Bowonder, “Project Siting and Environmental Impact Assessment in Developing Countries,
Project Appraisal 2, No. 1 (March 1987), pp. 1-72; N. Lichfield, “Environmental Impact Assessment in
Project Appraisal in Britain,” Project Appraisal 3, No. 3 (September 1988), pp. 125-180; J. Stringer,
Planning and Inquiry Process, MPA Technical Paper No. 6, Templeton College, Oxford, September
1988.
6. P W. G. Morris, “Managing Project Interfaces—Key Points for Project Success,” in D. I. Cleveland
and W. R. King, eds., Project Management Handbook (New York: Van Nostrand Reinhold, 1988); C.
E. Reis de Carvalho and P. W. G. Morris, “Project Matrix Organizations, or How to Do the Matrix
Swing,” 1979 Proceedings of the Project Management Institute, Los Angeles (Drexel Hill, Penn.:
1979).
7. W. E. Deming, Out of Crisis (Cambridge, Mass.: MIT Press 1989); M. Imai, Kaizen (New York:
Kaizan Institute/Random House, 1986); J. M. Juran and F. M. Gryna, Juran’s Quality Control
Handbook (New York: McGraw-Hill, 1988).
8. P. 0. Gaddis, “The Project Manager,” Harvard Business Review (May-June 1959), pp. 89-97.
9. A. Stretton, “A Consolidation of the PMBOK Framework and Functional Components,” Project
Management Journal 20, No. 4 (December 1989), pp. 5-30.
10. “Project Managers and Their Teams: Selection, Education, Careers,” Proceedings of the 14th
International Experts Seminar, INTERNET, March 15-17, 1990, Zurich, Switzerland. See particularly
the papers by R. Archibald and A. Harpham; E. Gabriel; and R. Pharro and P. W. G. Morris.
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Title
Chapter 5
Project Initiation Techniques: A Strategic View
----------- Harvey A. Levine
Project Knowledge Group
Perhaps the hardest part of the project planning process is getting started. Certainly, overcoming inertia
usually contributes to the problem. And then, there’s always the problem of getting some relief from your
other duties. But the major cause of difficulty and procrastination is the lack of a framework for engaging in
the process and developing the plan itself.
To start with, you want to address the crucial identification of project objectives, constraints, and
stakeholders. Then you need to move on to organizing for the project and development of the project team.
This team participates in the development of a strategy for achieving the project objectives and the
clarification of the role of the various project stakeholders. The team then proceeds to the development of a
framework for the work scope, timing, and budgeting aspects of the project. These include work breakdown
structures (WBS), organizational breakdown structures (OBS), structures for cost accounting, and project
milestone schedules.
It is not unusual to falter seriously at the project initiation stage. We don’t quite know where and how to start.
Some project managers put the process off until it’s too late to develop a plan of their own choosing, getting
stuck, instead, with a plan that is by now doomed to failure from the start. Other project managers attempt to
produce a quick schedule, or a resource plan, or an expenditure plan (budget), or perhaps all three. What they
soon find out is that they don’t have all of the answers that they need and that their plans are full of holes.
Indeed, that is the nature of the beast. In most cases, the project planning process starts off with a set of
assumptions, and the project planning process is used to validate these assumptions. Rather than putting off
the planning process until the missing pieces are found, the smart project manager uses the process to help
generate the missing data.
Obviously, there is a lot of front-end work that must be executed prior to establishing the project schedule,
resource plan, and budget. And, contrary to popular thought, a good deal of this effort does not involve the
use of the computer. At this point, the project manager would do well to consider the following course of
action:
This chapter is copyright © 1988, 1991 The Project Knowledge Group, Clifton Park, New York.
• Examine the objectives for this project and the various constraints that impact upon these objectives.
• Identify the project stakeholders and how they, too, impinge upon those objectives.
• Develop a project strategy that supports the project objectives and stakeholders, while meeting the
various constraints.
• Put together a project team and other required resources and evaluate what limits they impose on the
execution of the project within time and budget constraints.
• Eventually, implement a planning and control procedure that can support the needs of the project
while being able to be supported by the project team.
Stakeholders
First, it is advisable for the project manager to identify all of the project stakeholders. Who are the people who
will have an impact on project success, either positive or negative? Or, stated differently, who are the people
who can make or break the project? For starters, don’t forget the owners of the enterprise. They probably have
the most to gain or lose from the project. The project manager and the owners have to evaluate whether the
objectives of this project are consistent with the general mission of the enterprise. Will attainment of the
project objectives enhance and be in harmony with the primary purpose of the business? Will implementation
of the project represent an improved utilization of the business’s financial, human, and physical resources?
Will the successful completion of the project improve the position of the company in its overall business
objectives?
There are two very important reasons for obtaining “yes” answers to these questions. The first is to check for
a proper fit with the other business of the company. The lack of such a fit often places the company’s
resources in disarray, exacting a toll on both the new project and the other company business. The second is
that, without this required fit, the project manager is unlikely to obtain the required support of his or her
superiors. Without sponsorship in high places, a project eventually fails for lack of support in critical
situations. This evaluation is the first of many instances where the project team is required to determine
whether to continue the project, to make significant adjustments to objectives and strategy, or to abandon it.
Other stakeholders include the project sponsor, key project participants, company clients and prospective
clients, regulatory agencies, suppliers and subcontractors, and users of the project product—essentially,
anyone who can have an impact on the success of the project or who might be involved in the determination
of the project success.
In the traditional business strategic planning process, the next function is to attempt to identify significant
opportunities, threats, and issues. This same process should be applied to a project. Any project involves risk.
An early evaluation of potential threats helps the project team to prepare to deal with these and to minimize
their impact. Any project involves opportunity. While the key opportunities are usually part of the original
project purpose and justification, an evaluation of potential secondary opportunities may uncover additional
benefits to the company and the project participants. An attempt to identify all issues that may impact on the
project, to list them, and to discuss them with the project stakeholders should promote knowledge of and
sensitivity to the issues and prevent them from having a severe negative impact on the project.
The strategic planning process, as well as the project planning process, is not a one-person process. At this
time, the project team must be identified and assembled. While it certainly is possible that the strategy that
develops may impact upon the makeup of the project team, some of the key players should be involved in
generating the data for the strategy development and analysis and in developing the project strategy. At a later
point in the process, a strategy and project plan has to be adopted. It is most important that the project team
understand the strategy and support it. The more that people participate in the development of a plan, the more
likely they are to support it. This buy-in of the strategy is a key to success of the project.
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Most projects exist within the larger sphere of an existing, ongoing business. They are accomplished by
people who generally are part of this business and its organization and culture. Yet many organizations treat
projects as though they take place in a different, separate environment from that of the organization. When
this happens, project managers and their senior managers tend either to ignore or to change independently key
practices that are crucial to maintaining the organization’s essential structure, culture, and business strategy.
Clearly, there are important differences between managing a project and the day-to-day operations of a
business. But when the project unfolds independently or outside of an organization’s mainstream operations
and culture, it can often have an adverse impact on the integrity of the business. In many industries, project
objectives are virtually synonymous with an organization’s business goals. In such instances, the success of
key projects may have a major impact on the ability of the business to continue to be competitive—even to
survive.
Therefore, organizations that apply traditional strategic planning practices to a project must focus on
integrating the project into the organization and its culture. This requires analyses of several project
constituencies—the project sponsor, other project stakeholders, the organization in which the project unfolds,
and the project team—as well as of the strategic planning process itself.
Stakeholder Analysis
How do we align the project objectives with the goals and expectations of the stakeholders so as to minimize
the potential for conflicts that could adversely affect the project’s success? One way to do this is to expand
our view of project success.
The traditional view of project success is the accomplishment of all of the schedule, budget, and technical
objectives as planned. Couldn’t we also define project success as accomplishing the goals of everyone who
has a stake in the project? If so, then the stakeholder analysis must ask:
• Who are the project stakeholders?
• What do they want?
• How can they impact success?
• How can they be satisfied?
Carrying this thesis further, we might say that project success is determined by:
• The power and influence of the project stakeholders
• The difficulty and risk involved in the stakeholders’ goals
• The talent and resources available to accomplish these goals
• The perceptions of the stakeholders of what was actually accomplished1
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Design Objectives:
1. Provide parking for 3,000 vehicles.
2. 1,000 of that capacity to be paved.
3. 1,000 to be gravel base (for later paving).
4. Remainder to be overflow on grass field.
Budget Objectives:
1. Costs to be charged to capital improvement budget—not to exceed $250,000 for all infrastructure
items.
Timing Objectives:
1. Complete repaving before annual homecoming football game. Do not interfere with any other
scheduled games.
Current Facilities:
1. Paved parking for 1,000 cars. Needs repaving.
2. Adjacent level field for 1,000 cars. Dirt base.
3. Additional adjacent field (undeveloped) available for 1,000 cars.
Favored Plan:
1. Repave existing 1,000-car lot
Area = 270,000 sq. ft.
Cost = $0.40 per sq. ft. =
$108,000
2. Improve old overflow area with gravel base.
Area = 270,000 sq. ft.
Costs
Gravel: 3,400 tons of #1
crushed gravel @ $6/ton =
$20,400
Trucking @ $30/25 ton load =
$4,080
Spread and compact =
$13,500
Total cost = $37,980
3. Clear and grade new overflow area.
Area = 270,000 sq. ft.
Cost = $6,000
4. Paint stripes in paved area.
Quantity = 20,000 linear ft.
Cost = $5,000
Constraints:
1. Planning Board approval.
2. Funding approval.
3. Timing interface with football games and other events at the stadium.
Strategic Considerations and Alternatives:
1. If repaving/curing of paved lot cannot be completed prior to the homecoming weekend, consider
completing gravel placement in old overflow lot plus grading of new overflow lot and using these for
homecoming parking.
2. If insufficient funding is available for all infrastructure items, hold off on repaving old lot.
A major component of the front-end work required to plan and initiate a project effectively is the development
of a framework for the project model. This framework, or structuring, of the project is important to the
development of a complete and organized project plan. It is also essential to permit the sorting, selecting,
grouping, and summarization of the project data which, in turn, are essential to support recognized
management-by-exception techniques and reporting to the various stakeholders.
If we define the process of project planning and control as the integration of the project work scope, timing,
resource usage, and cost, then we need to develop a structured base for each of these, as follows:
• Work Scope: A top-down hierarchical model, called a work breakdown structure (WBS). And,
perhaps, an alternate hierarchical model, by responsibility or performer, called an organizational
breakdown structure (OBS).
• Timing: A project milestone schedule.
• Resources and Cost: A set of resource codes and cost accounts, used to facilitate selection, sorting,
summarization, and interrogation of resource and cost data.
The first step in creating a project framework is usually to define the WBS, as this is the framework for the
project work scope. If you cannot define the work scope, then you cannot define the schedule, resources, or
budget for the project. The WBS first helps with this work scope definition and then becomes the framework
for the identification of the details of the project. The WBS is an organization chart for the project work. If
you were to draw a typical project WBS, it would look just like a typical business organization chart. At the
top would be a single box, for the project. Under that would be the main divisions of the project. A popular
term for this level is project deliverables. The WBS can also be depicted in an outline form.
The approach works for any type of project. For instance, if your project is a prototype bomber for the Air
Force, the WBS, at the deliverables level, might look like Exhibit 5-2. If your project is the development of a
new product, like a new cereal, the WBS might start off as shown in Exhibit 5-3.
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Title The deliverables section gives us our first level of project definition and a framework for further structuring.
Each of these items can usually be traced back to a basic project objective. Each of these items can usually be
assigned to a specific responsible individual, for accountability. The development of the WBS continues in
increasing levels of detail. Returning to the Air Force bomber project, we can expand the first item of the
WBS as shown in Exhibit 5-4.
-----------
Exhibit 5-2. WBS for Air Force prototype bomber project.
Thus far, we have illustrated the WBS in an outline format. Exhibit 5-5 shows more of the Air Force
prototype bomber WBS in the alternate organization chart format.
Eventually, each of the lower items can be subdivided even further, into work packages and individual
activities. A hierarchical numbering system can be used to imbed the WBS into the activity identification
code. There is rarely an ideal work breakdown structure for a given project. The important thing to keep in
mind is to develop a framework that truly is indicative of how the project itself is structured and how the
participants are likely to follow its execution.
Note that with this numbering system, your project management software system should permit you to use
these codes to select specific portions of the project, to group activities within a common code, to sort
activities by that code, and to summarize certain activity data at higher levels. A few products have recently
introduced an outlining function that allows you to develop your project activity details in an outline form.
Most of the other programs provide user code fields for this purpose. The outliner format offers greater
simplicity but is usually limited to a single WBS type framework. User code fields—which may range from
two to twenty code fields, depending on the product—offer greater flexibility and the ability to have more
than one WBS.
Exhibit 5-3. WBS for new product development project.
Exhibit 5-4. Expansion of WBS for Air Force prototype bomber project.
Why would anyone want more than one WBS? The answer is to support the information needs of all of the
stakeholders. The deliverables-oriented WBS may be a handy way for the project manager to group the work.
But the functional or line manager may want to look at it from a responsibility-oriented point of view. To
facilitate this, we often develop a second framework, called the organizational breakdown structure. Using the
OBS, we can assign codes by responsible manager or department. Additional activity coding schemes can be
used to assign physical locations, project phases, priority codes, budget divisions, etc. Each of these codes can
be used to sort and select activities and for grouping and summarization.
The WBS and other structures, established in a coding scheme or an outliner, allow for the efficient and
effective display and reporting of vast amounts of project data to the various interested parties. Also, once
established, the WBS can be used as a checklist for additional project work that may be similar to an earlier
project.
The development of the WBS and other structures does not necessarily occur all at once. During the project
initiation process, the WBS is initiated and developed down to some intermediate level. At that time, it is also
advisable to develop a timing framework for the project.
Exhibit 5-5. WBS in organization chart format for Air Force prototype bomber project.
The WBS is a framework for the definition of the project work scope. Another framework is the project
milestone schedule. The PMS is a framework for the timing of the project and provides a structure for the
project detailed schedule. Again, we face the question of where to start. And again, we note that the
development of the schedule is an iterative process. We may initiate that process when the top levels of the
WBS are developed, and continue to increase the level of detail as we define the project in greater detail.
Continuing the schedule development, we then integrate the schedule data with expected resource constraints.
Finally, we attempt to optimize the schedule by balancing timing, resources, and other constraints, until we
accept the schedule as part of a baseline plan.
The PMS, as the framework and first part of this scheduling process, is a vehicle for recording the time
constraints, time objectives, and other givens pertaining to the schedule. Therefore, the process for developing
the PMS is as follows:
• Start with the key dates that you already know. These may be a given project start date, a target or
contractual project end date, and interim milestone dates.
• Note any special time-based constraints. This could be a plant shutdown, a critical design review, a
company board meeting, a trade show commitment, and any contract commitment dates.
• Add any internal interim milestone dates and preliminary high-level time frames. These include
target starts and completions for various phases, resource-based timing objectives, arbitrary time
dividing elements, weather-dictated factors, and known or typical time cycles for major components or
effort-driven work.
The project milestone schedule provides guidance by defining the time windows into which the task
scheduling attempts to fit. Exhibit 5-6 shows such a schedule for the almonds and molasses cereal project
described earlier. Exhibit 5-7 is an example of a PMS for a turnkey power plant project.
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Up to this point, we have been talking about work scope and timing structures for activities. In a project
management database, each activity may have one or more resource or cost elements associated with it. There
are people associated with the project who are more interested in an aggregation of resource and cost
----------- information than in the activity view. This collection of information is achieved by assigning resource codes
to each resource (or each task) and defining a cost account structure for the system. If possible, you may set
up a resource hierarchy so that resources can be put into groups. Unfortunately, many of the commercial
project management software programs do not support this feature. Most programs, however, do not support
some kind of cost account numbering system.
If you intend to use any performance measurement procedures, you need to establish a structured basis for
subdividing the project into collective elements that are meaningful to those people who are interested in the
project performance results. Most programs provide at least one data field that can be used to define a code of
accounts for the system.
Effective cost management through the utilization of project management software systems is an elusive
objective. The integration of work measurement (schedule progress) and cost measurement, the main
ingredients required for project performance measurement and control, is built into most project management
software products. Yet that potential is not often achieved by the system users. There are three significant
causes of this failure.
Exhibit 5-6. Project milestone schedule for new product development project.
1. Difficulty in synchronizing the timing for the progress measurements and the cost measurements
2. Linking of the project management systems to the accounting systems
3. The tendency to set up different measurement categories for the progress and the cost
The latter two items can be addressed when we develop the activity and cost structures for our project. It is
imperative that you identify and recognize the way that cost data is collected for your project. If the project
database is set up to one structure and the cost data is being collected to a different structure, the integration of
the two is obstructed. Useful project performance measurement requires the integration of the progress and
cost data, which mandates the establishment of a common set of pigeonholes into which to funnel the
experience data.
Exhibit 5-7. Project milestone schedule for turnkey power plant project.
• We look at organization and culture and establish plans to work within the existing environment and
the overall business strategy.
• We identify the project stakeholders and look at how they measure success.
• We develop a project strategy that is fully consistent with the business and stakeholders and
addresses the opportunities, risks, and issues associated with the project.
These front-end activities are essential to the initiation of a project, regardless of the automated project
management tools employed, if any. We then move on to building the frameworks for the project plan.
• We develop a set of structures (the WBS, OBS, PMS, code of accounts, etc.) so that there is a
framework for the project database.
• We use these structures as an aid in identifying the project work scope and in developing the baseline
schedule and budget.
• Assuming that some kind of project management software is being used, we then use these same
structures to sort the data, to select sections of the data, to group the data, and to roll up activity,
resource, and cost data to various summary levels.
No project is ever easy to manage, and no project management software system is a panacea. But we can be
pretty certain that the application of automated project management tools will fail to deliver its potential
without a decent framework. Without a proper foundation of strategic thinking and organized structures, the
project will crumble to the ground.
Note
1. John Tuman, Jr., “Success Modeling: A Technique for Building a Winning Project Team,” 1986
Proceedings of the Project Management Institute (Drexel Hill, Penn.: PMI).
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Title
Chapter 6
Project Team Planning: A Strategy for Success
----------- Russell D. Archibald
Integrated Project Systems
Recognition of the need for project team planning has grown out of the increased awareness of: (1) the
weaknesses in the more traditional project planning approaches, (2) the difficulties in getting functional
managers and team members to be committed to a plan that has been created by others, and (3) the need to
accelerate the project planning and team-building processes at the very beginning of the project. The concept
of project team planning applies equally to the inception of the conceptual phase and to the starting up of any
subsequent phase of a project. It can also be used effectively when any major change in scope is required or
when a major, unforeseen problem is encountered.
Although the importance of getting a project off to a good, well-planned start has long been recognized, it has
only been within the last ten years that the concept of systematic, well-planned project start-up workshops has
been widely accepted and used. The INTERNET Committee on Project Start-Up—which was established in
1982 under the leadership of Dr. Morten Fangel—has been instrumental in promulgating and documenting
this concept. (The committee’s Handbook of Project Start-Up provides detailed information on the concept
and methods and many examples of experience in its application in various industries and geographic areas of
the world.)
The fundamental essence of the concept of these systematic project start-up workshops is project team
planning. The start-up workshop, when properly conducted, provides the setting and well-planned process
that enables the project team to work together effectively to produce integrated plans and schedules in a very
short time period. (The phrase project start-up may be misleading since the concept applies not only to the
very first “start-up”—say, at the beginning of the conceptual phase of a project—but also to those at the
beginning of each subsequent phase: definition, planning, or proposal; execution or implementation; and
project closeout. Thus, the term project phase transition workshop may be more appropriate than project
start-up workshop.)
Parts of this chapter were adapted from Russell D. Archibald, Managing High-Technology
Programs and Projects, Second Edition (John Wiley & Sons, 1992), Chapter 11. © Copyright
1992 by R. Archibald.
Adequate Preparation
Prior to bringing together a project team for a team planning session, it is vital to prepare adequately for the
meeting. This includes:
• Defining the specific objectives of the team session and the results to be achieved
• Establishing a well-planned agenda
• Preparing sufficient project planning information in preliminary form (e.g., project objectives, scope
definition, top levels of the PBS/WBS, team member list, and established target schedules, if any)
• Setting the session date sufficiently in advance to ensure that all team members can attend
• Announcing the session through appropriate authoritative channels to ensure higher management
interest and support and to ensure that all team members show up
• Defining and understanding the planning process to be used and the roles and responsibilities of the
project manager and the planning process facilitator
• Arranging for a suitable meeting facility and related logistical support
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-----------
It is widely recognized that the key characteristic of the project manager’s role is that of integration. In project
team planning, the integrative role of the project manager becomes quite obvious. The project manager must
assist the project team members in developing an acceptable plan and schedule that achieve the objectives of
the project and reflect the plans and available resources of the various team members. The project manager
usually holds the lead responsibility for preparing for the team planning sessions, as discussed earlier.
During the planning sessions, the project manager must be alert to real or potential conflicts in plans and bring
these to the surface for resolution. He or she must concentrate on identification of the key project interface
events, or those points of transition of responsibility from one team member to another, since one of the key
tasks of the project manager is to manage these interfaces properly. A second key role in the project team
planning process, that of the process facilitator, can also be taken by the project manager, but experience
shows that it is much more effective for another person to carry out the facilitator role.
The plans, schedules, and other planning documents created during a team planning session should be limited
to integrated plans at the overall project level. Of course, these require definition of the project down to the
major functional task level, so that responsibilities can be assigned to, agreed upon, and understood by the
team members. The team-produced project master schedule shows the agreed target dates for key milestones,
reflecting the team’s judgment on the overall allocation of time to accomplish the intermediate and final
objectives.
Team planning sessions are not intended to produce detailed, functional plans, schedules, and budgets. To
attempt to do so would be an extravagant waste of valuable time. Rather, these team sessions are intended to
set the stage for truly effective detailed planning, scheduling, and budgeting. Based on the results of the
top-down planning performed by the project team, under the integrating influence of the project manager and
guided by the planning process facilitator, the stage is set very effectively for the detailed planning needed to
validate the team’s efforts and prove whether their judgments are correct.
At this point, the project manager—often with the assistance of planning, scheduling, and estimating
specialists—can proceed with the more detailed, integrated planning that is necessary to ensure effective
monitoring and control of the project. The top-level project plans produced by the team can be entered into
the computer software to be used on the project. The more detailed functional plans and schedules can also be
entered in the planning and control system, to the extent that this is warranted and practical. At this stage, the
planning, scheduling, and estimating specialists may well work one-on-one with the various functional
contributors to develop the detailed plans within the framework developed by the project team.
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The specific planning deliverables produced during these team planning sessions were:
• A list of key concerns and major open issues
• A list of all project team members, including the client team members, with office and home
telephone numbers and electronic mail addresses. Also included were the names of immediate bosses
and their office and home telephone numbers, for use in solving unresolved problems or conflicts
• Project scope and objectives
• Agreed upon definition of the project in the form of a project breakdown structure (PBS), usually
down to four or five levels
• Agreed upon task/responsibility matrix, based on the PBS, with codes showing for each task: (1) who
does the work, (2) who must be consulted, (3) who must be notified or receive a copy of the results, and
(4) who must approve the results
• A list of the key project interface events, indicating who would be the originator and who the receiver
• The project master schedule, based on the PBS, with team commitments thereto
• Agreed upon project monitoring and control procedures
• Action assignments from the planning sessions
• The Project Handbook, a three-ring binder with dividers for retention of the above documents, for
use by each project team member throughout the life of the project. As the plans were revised and
updated, the latest documents were placed in these handbooks
For each AT&T project, the assigned project manager planned and prepared for each team planning session,
following the guidelines described earlier in this chapter. An experienced facilitator assisted the project
manager in this preparation and in conducting the sessions. For each planning deliverable, the facilitator gave
a brief presentation of the project planning concept, and then the project team immediately applied that
concept to the project. In developing the project breakdown structure and the task/responsibility matrix, small
teams of four or five people worked together on the specific portions of the project for which those team
members held responsibility. The small teams reported their results to the full project team to ensure complete
agreement and understanding.
Results Achieved
The results of these team planning sessions were and continue to be excellent. The projects have been
completed on schedule and without crash efforts near the end date, saving money and increasing quality.
Improvements have been noted in getting the projects started more quickly and smoothly, in increased
cooperation with the client, in better communications, and in better teamwork. The functional team members
have reported that this approach requires less of their time for planning than the more traditional methods
used previously. Team planning through start-up workshops has been incorporated into the AT&T corporate
project management process and is used on all major projects within this business segment of AT&T.
Several hidden agenda items have been reported as benefits of the team planning approach:
• Introducing uniform project management methods
• Hands-on training of project team members in project planning
• Tapping the team wisdom
• Creating a shared vision of the project and its objectives
• Demonstrating the power of open team communications
• Exchanging experience and developing skills
• Creating a team and getting commitment
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Title
Section III
Project Structures and Organizations
----------- Chapter 7
Organizational Choices for Project Management
Brian Hobbs
University of Quebec at Montreal
Pierre Ménard
University of Quebec at Montreal
How should a particular project be organized? There is no clear and simple answer to this question. The
project management literature on organization structures presents the problem as one of a choice among three
alternatives:
1. The functional structure
2. The project or fully projectized structure
3. The matrix structure
This approach has the advantage of providing a clear conceptual framework for the analysis of organizational
structures. However, it is of limited usefulness to the manager who must decide how to organize a specific
new project without restructuring the whole organization.
Projects are often undertaken by organizations whose main activities go much beyond these projects. These
organizations already have a structure for managing their activities, whether it be a functional, product,
matrix, or hybrid structure, and they are not considering restructuring to accommodate a new project. The
problem that the manager faces, then, is not which structure to choose for the organization but rather:
• How should the project be positioned with respect to the existing organization, and what relationships
should be established between the project and the existing organization?
• How much autonomy and authority should be given to the project manager? What should his or her
status be?
• What management practices and systems should be used to manage this project? To what extent
should they be different from those in use in the existing organization?
This chapter attempts to answer these questions by drawing on the project management literature and on the
authors’ experience with several organizations that manage projects.
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Title All of these factors help explain why there are pressures to integrate the project into the existing structure and
management systems and practices and where these pressures come from. But beyond this, there is the very
context within which a decision on project organization and structure is usually made. Those pulling for
project autonomy are usually the project manager and possibly a core team. The project manager usually has
relatively low status within the organization. On the other side, those pulling for project integration into the
----------- existing organization are many, and among them are higher-status managers. The dice are therefore loaded
toward integration unless a member of upper management acts as project sponsor and actively promotes
project autonomy.
This discussion of the pressures toward project integration into the existing organization describes the context
within which top management must decide on the appropriate organizational arrangements for a specific
project. Should management resist these pressures and establish arrangements that are specific to the project?
If so, to what extent should the project be distinct and autonomous from the existing organization? The
answer to these questions depends on the specific context. Many factors intervene, but these can be grouped
into three categories as shown in Exhibit 7-1.
1. The structural type of the existing organization
2. The factors related to the organization: the organizational contextual factors
3. The factors related to the specific project: the project factors
The choice of an appropriate organizational arrangement for the project depends on these groups of factors
and the relationships among them. We will now describe in more detail each category of factors and how they
are related to the choice of a project organization.
The functional structure is a widespread organizational form. As can be seen in Exhibit 7-2, its principal
components are functions or areas of technical and administrative specialization. The main objectives in
organizing units according to their specialty are:
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Title Projects can be executed well within purely functional structures when each project can be executed almost
exclusively by one primary function or when the projects can be broken down into subprojects that require
little integration and thus can be assigned to different functional departments. Furthermore, functional
organizations tend to perform better on projects in which the development of technical content is the primary
consideration. It would therefore be appropriate to integrate small development projects under
----------- reimbursable-cost type contracts into a functional structure by assigning them to the appropriate department.
Exhibit 7-3. Characteristics of the functional structure.
Advantages Inconveniences
Technical competency
• Development and maintenance of technical • Filtered perception; lack of an overall view
competency in specialized fields
• Synergy among specialists • Difficulty in integrating several specialties: possible
conflicts among specialists
• Difficulty in creating motivation for the project
• Lack of openness to the environment
• Risk of neglecting the aspects not related to the
specialty
Objectives
• Concentration on the objectives of the function • Conflict of priorities with other functional activities
• Pursuing long-term development objectives • Difficulty in making effective compromises between
the variables quality-time-cost
• Easy reconciliation of internal objectives • Nobody is exclusively responsible for project
objectives
• Subordination of the managerial to the technical
Permanence and stability
• Horizontal relations are clear • Difficulty in adapting; resistance to change
• Clear definitions of roles and responsibilities • Difficulties in the internal circulation of information
• Efficiency improved by standardization • Slow decision
• Stability in interpersonal relations making
• Well-defined career paths
• The possibility for organizational learning
Control
• Easier control of quality and performance • The time variable is less well controlled
• Flexibility and economy in the use of labor • Limited liaisons with the outside
• Lack of visibility for the client
• Limited development of management capabilities
among the personnel
Multidisciplinary projects that require the integration of system components, the management of external
interfaces, and the negotiation of trade-offs among time, cost, and quality requirements should, however, not
be assigned to one department of a functional organization. We turn now to a description of the project
organization that in many ways is the exact opposite of the functional organization.
When an organization is given responsibility for the execution of a major project, it often places the project in
a temporary structure more or less independent from the rest of the organization. This is referred to as a
project organization or fully projectized structure. Specifically, the organization is seeking to:
• Concentrate the responsibility for the conduct of the project in the hands of one person whose only
preoccupation is the success of the project and the attainment of project objectives
• Facilitate the integration of different technical specialists required by the project as well as other
relevant dimensions, such as political, cultural, economic, and environmental
• Ensure that decisions affecting either the content or the managing of the project are the result of an
optimum compromise among the different objectives of the project; in other words, avoid the undue
and systematic predominance of one objective, particularly the technical objective
Many variations on the project structure exist, but they all have in common a project manager with more or
less full authority over his or her resources. Obviously, this type of structure is chosen for special temporary
organizations designed to execute one or several specific projects. In practice, all the necessary resources are
not always placed under the exclusive supervision of the project manager. Certain support functions such as
accounting, legal services, and information services often remain integrated into the parent organization’s
management systems.
The advantages and inconveniences of the project organization are relatively obvious. As the project manager
has no functional responsibility, conflicts in objectives and priorities are minimized. However, conflicts may
arise in establishing priorities between projects or between the projects and the parent organization concerning
the sharing of resources. The project team is less likely to have a strong bias for a particular specialization.
This facilitates taking an overall view of the project. There is no undue bias for technical quality, which
permits an effective compromise among the quality-time-cost variables. The project manager has clear
authority over his or her resources. This reduces ambiguity and permits better coordination, as well as
promoting effective collaboration among the resources. This authority also makes the project manager the hub
of all formal communications related to the project. He or she thus becomes a credible spokesperson for the
project in relation with the client and other outside stakeholders.
The project organization avoids the inconveniences associated with the functional structure. However, it does
not offer the same advantages. The disadvantages of the distinct and autonomous project were discussed
earlier either as limiting conditions for the use of this structural arrangement or as sources of resistance to its
implementation. The advantages and inconveniences of this structural arrangement are summarized in Exhibit
7-4.
The fully projectized structure is thus an appropriate organizational choice for major projects that require
systems integration; trade-offs among cost, schedule, and quality; and clear communications channels with
outside stakeholders. An organization that wishes to execute one such project but feels that its existing
structure would not be appropriate may create a temporary independent project organization just for this
project. In this way, the organization can effectively execute the project while minimizing the descriptive
effect it might have on the going organization. This is what organizations do, for example, when they create
task forces for special projects. We turn now to a discussion of the matrix structure.
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The matrix structure is an organizational form that seeks to combine the advantages of the functional structure
and the project organization while avoiding their inconveniences. As the typical organization chart (as shown
in Exhibit 7-5) illustrates, the matrix structure is characterized by the simultaneous presence of both project
----------- and functional components. These components are administratively independent, but interdependent in the
execution of projects. This arrangement permits functional components to maintain an independent existence
and to pursue, where appropriate, their regular activities while providing specialized resources necessary for
the execution of projects. In general, the specialists remain permanently under the authority of their functional
head, but their services are lent to the projects on a temporary basis in accord with project needs. The
functional components thus become centralized reservoirs of specialized resources.
Exhibit 7-4. Characteristics of the fully projectized structure.
Advantages Inconveniences
The autonomous existence of the project components permits the organization to benefit from most of the
advantages of a project organization. The project components are comprised of project managers directing
temporary multidisciplinary teams whose composition may frequently vary as the project progresses through
the different phases of its life cycle.
The matrix structure places the project and functional sides of the organization in a situation of high
interdependence. The two must collaborate if the structure is to work well. Despite the high level of
interdependency and the need for close cooperation, the matrix structure performs better if the responsibilities
of each party are made as clear and as distinct as is reasonably possible. Generally, the responsibilities are
distributed between the two dimensions as follows:
1. The project dimension is:
• Responsible for results
• Attaining project objectives
• Producing the desired deliverables to meet schedules
• Respecting budgetary constraints
• Minimizing costs
• Responsible for liaison with the client and other external stakeholders
2. The functional dimension is:
• Responsible for the technical quality of projects and maintaining technical excellence
• Responsible for the efficient use of specialized resources
• Responsible for the management of specialized resources
• Hiring and initiation
• Training, development, and acculturation
• Evaluation
• Responsible for developing the organizational memory
The project manager is generally responsible for overall project planning; identifying project objectives,
deliverables, and the principal elements of the work breakdown structure; determining the key elements of the
schedule; and establishing a preliminary budget for the work packages. The functional representatives assume
responsibility for identifying the required resources, defining the content of the work packages, and
monitoring work progress and quality.
Our objective in describing the matrix structure is not to provide a detailed analysis of this complex structural
arrangement but rather to describe the structural context within which an answer must be found to the
question as to how to organize a specific project. The project-functional matrix is a structure that is designed
to manage projects. Most projects would therefore normally be managed through the existing structure.
However, projects that because of their specific characteristics could be managed effectively in a functional
structure could also be assigned directly to the appropriate functional department in the matrix structure. An
example might be a small in-house development project that calls upon the resources of only one department.
Likewise, a project whose characteristics would justify the creation of a distinct and autonomous structure
could be set up in this way alongside the existing matrix structure. An example of this might be a major
project that required the fulltime and stable use of considerable resources over an extended period of time or
that drew heavily on outside resources. But this would be an exceptional situation.
For projects that are managed through the matrix structure, the question then becomes twofold. First, what
should be the reporting relationships between the project manager and the resources working on the project?
Exhibit 7-6 provides guidelines for such relationships as they vary with the importance of contributions made
by the different human resources. Second, what level of authority should be invested in the project manager,
particularly in his or her relations with the functional managers? Here again, the characteristics of the specific
project determine the appropriate sharing of power between the project and functional managers. We refer
you to the discussion of project-related factors later in this chapter. We turn now to a discussion of organic
structures.
Exhibit 7-6. Reporting relationships in the matrix structure.
Small R&D or other highly professional organizations often have organic structures. These are organizations
that have few formal structural arrangements. In these organizations, teams form around problems or projects.
Recruitment onto project teams is rather informal, as are reporting relationships. In these organizations
projects often are initiated lower down in the organization. A project manager or team leader recruits the
resources he or she needs to form a team from among the organization’s resources in a rather informal
manner.
The question as to whether or not to integrate a new project into this structure depends on the characteristics
of the specific project. The organic structure works well for small, very creative projects. These can therefore
be integrated into the existing organization by finding a project manager who will champion the project and
see that the necessary resources come together to form a project team. However, a project that because of its
characteristics could be managed as a separate and distinct unit could be set up as such, parallel to the
workings of the existing organization. An example in this case might be a larger project with more precise
requirements or one over which management wishes to maintain tighter control.
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The ready availability of resources facilitates the establishing of an autonomous project unit. Inversely, a
severe constraint on the availability of a critical resource may necessitate the sharing of resources with the
parent organization. This will reduce project autonomy and partially integrate the project and the organization.
-----------
If a particular category of resources is very rare both within the organization and in the outside market, it may
not be practical or possible to assign these resources exclusively to the project team, since this would create a
shortage within the parent organization and thus jeopardize the pursuit of its other activities. Both physical
resources, such as special equipment and human resources, may be in short supply. It may not be practical to
recruit or purchase new resources because of lack of availability in the outside market or because the duration
for which they would be needed would not justify either purchasing new equipment or hiring and training new
personnel. Then again, a tight project schedule might preclude either of these options.
In any case, the project will likely have to share resources with the parent organization. This sharing of
resources will effectively integrate the project partially into the parent organization. More coordination effort
will be needed to adjust to both project and other organizational demands and the project manager will need to
devote more time and effort to managing the interface with the departments with which the project must share
resources. This is the unavoidable consequence of constraints on resource availability and the resulting need
to share some resources.
The less the organization’s existing information systems and administrative policies and procedures are able
to adequately serve project needs, the more the project needs to have specific and dedicated systems and
procedures. Specific and dedicated systems and procedures are almost impossible to establish and maintain,
except when the project is set up as an autonomous unit. The setting-up of separate systems and procedures
has the effect of making the project unit even more autonomous from the parent organization.
Projects tend to have very specific needs in terms of planning, control, procurement, delegation of
decision-making authority, reporting, and other administrative activities. Existing administrative procedures
and information systems may be more or less adequate in meeting these needs. In the case of a project-driven
organization, unless a new project has needs that are radically different from those of other projects, existing
management systems may well be adequate for managing the new project. However, organizations whose
main activities are not organized on a project basis have management systems, and particularly information
systems, that may or may not be adequate for supporting the project.
Several years ago, few information systems in nonproject-driven organizations could support project-oriented
planning and control, and even in some project-driven organizations, the management information systems
were less than adequate. Typically, the categories that the rest of the organization used for budgeting and
controlling were inappropriate for project planning and control, and the systems were not flexible nor
powerful enough to be able to adapt to project requirements. Report-formatting has also been a problem, as
some systems do contain the necessary information, but are not designed to produce a concise project report;
the information is often buried in a mountain of printouts and reports, and thus remains virtually unaccessible
to project personnel. Projects often operate within a time frame that is different from that of the rest of the
organization. The imperatives of the project schedule and the interdependencies that exist among different
activities within the project often require that information be timely so that decisions can be made quickly.
Administrative policies and procedures that may be appropriate for the rest of the organization are often
poorly adapted to project requirements. Procurement policy and procedures; personnel policies and
procedures in such areas as personnel selection, salaries and benefits, personnel evaluation, and the hiring of
temporary personnel; sub-contracting policy and contract management procedures in general, and the system
of standards and authorizations for obtaining certain resources such as additional space and equipment and
travel expenses are all examples of areas where following established policies and procedures may impede
project performance. The reason is either the project time frame is different from that of the rest of the
organization or the decision criteria implicit in these policies and procedures are inappropriate within the
context of the project.
Many project managers take pleasure in telling stories of how a particular policy or procedure was shown to
be petty and ridiculous in the context of their project. They are also highly critical of information systems that
do not meet their expectations. The solutions they propose to solve these problems are the setting-up of an
autonomous information system for the project and the freeing of the project from many of the policies and
procedures that constrain the management of the project. These solutions inevitably involve some duplication
of work being done elsewhere in the parent organization. Typically, the project will acquire additional
equipment and personnel and develop administrative procedures and methods for treating information. Many
administrative functions are thus effectively accomplished by the project office. Summary data is provided to
the parent organization in order to meet the information requirements of the organization’s reporting system,
project managers are often willing to support the cost and effort required to establish and operate separate and
dedicated systems in order to get access to timely and accurate information and to have more freedom and
flexibility in the use of the project’s resources.
This is inevitably opposed by the functional departments within the parent organization that are responsible
for information-processing and administrative functions. The role of these departments is to rationalize,
standardize, and control. Allowing a project to establish autonomous, dedicated systems and procedures
undermines their ability to fulfill their mission and weakens their position within the organization. The system
that adequately meets project needs may not adequately meet the organization’s legitimate requirements and
concerns. It also creates some duplication of effort and requires that administrative functions adapt to the
specific system the project might set up. If many projects set up separate and different systems, the
organization’s whole management system may become overloaded or chaotic.
In many organizations, a conflict exists between project managers and administrative functional departments.
The relationships between the two are often characterized by very infrequent communication and a lack of
understanding. Some project managers react by setting up unofficial parallel systems on which they rely for
accurate and timely information, while neglecting the information requirements of the organization’s systems.
This, in turn, makes the conflict worse, while confirming in their minds that the other side is either
incompetent or is acting in bad faith.
The decision as to whether separate systems and procedures should be set up should be based on an analysis
of the needs of both the project and the organization—and of the capacity of the organization’s existing
systems to serve both. An approach we have used has been to first plan the project and specify its critical
information and decision-making requirements, then to present these to the relevant functional departments.
The objective is to obtain either a commitment on the part of the functional departments to adequately
respond to project requirements or their approval for, and possibly support in, the setting-up of
project-specific systems. In our experience, the presenting of project requirements to functional support
groups before project execution can greatly reduce previous levels of mutual misunderstanding. This often
results in better support for the project from existing systems and can help avoid the extra cost and
inconvenience of setting up separate dedicated systems.
The Organization’s Culture
The more the organization’s culture differs from the project management culture, the more the project should
be isolated from the organization by setting it up as a separate unit.
Project management is more than the use of planning and control techniques and a way of organizing. It is
also a system of attitudes and behavior patterns that can be referred to as a project-management culture. The
decision as to whether a particular project should be integrated into the existing organization should be based,
partly, on a comparison between the culture that would support project success and the existing culture in the
organization and on an analysis of the likely impact the existing organization’s culture might have on the
project.
A detailed and structured analysis of organizational culture would be beyond the scope of this chapter.
However, Exhibit 7-7 presents several of the attitudes and behavior patterns that are either supportive of or
detrimental to project success.
Not all projects are dependent on the creation of a project-management culture and not all organizations are
unsupportive of this type of culture. But this is certainly not uncommon in functional organizations. The
decision to isolate the project from the rest of the organization in order to reduce cultural contamination
should thus be based on an analysis of the specific project and the impact that contact with the organization
might have.
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Supportive Detrimental
• Open communications and free circulation of • Guarded communications and restricted information
information flows
• Frequent lateral communications • Communications following the chain of command
• Willingness and ability to make decisions • Conformity to multistep multiperson approval
process
• Flexibility; organic • Rigidity; bureaucraticness
• Collaboration • Power struggles; conflicts
• Proactive; willingness to take initiatives, risks • Reactiveness; waiting for assignments, approvals
• Confrontation of ideas • Avoidance and submission: “The boss is right”
• Assuming responsibility for results • Avoiding responsibility
• Prime loyalty to project • Prime loyalty to function
• Behavior regulated by project needs (e.g., work on • Behavior regulated by rules (e.g., the 9- to-5
evenings, weekends) syndrome)
The greater a project’s strategic importance for the organization, the more it should be isolated from the
existing structure and set up as a separate unit.
There are two arguments that support this position. First, as shown before, integrating the project into the
existing organization increases organizational risks, particularly with respect to slow and fragmented decision
processes and internal conflict. If the success of the project is of crucial importance to the organization, its
chances of success would be increased if it was not subjected to these risks.
Second, a project that is detached from the existing structure is much more visible and subject to management
scrutiny. Inversely, a project that is integrated into the existing structure may become more difficult to
monitor as its activities are fragmented and partially integrated with other activities of the organization.
Projects of high strategic importance should receive much more upper management attention, and their being
managed separately from the rest of the organization facilitates top management monitoring and control.
The greater a project’s size, the more it is appropriate to set up a separate organization to manage it.
The larger a project is, the more economically justifiable it is to create a separate structure and to assign
resources to it on a full-time basis. In addition, managing a very large project within the existing organization
would require major adjustments.
By setting up a separate structure, the impact on the existing organization can be minimized, thus allowing the
organization to pursue its other activities while managing this large project.
The more a project’s content differs from the regular activities of the organization and the more the project
requires new and innovative solutions, the more the project should be isolated from the rest of the
organization by being set up as a separate unit.
Project novelty often takes the form of technological uncertainty or unfamiliarity, but many aspects of the
project may differ from normal activities or ways of operating. The more a project differs from other
organizational activities, the less the organization’s present skills are relevant for solving the problems that are
specific to the project. But, more importantly, if the project requires new and innovative solutions, it is
important to protect the project’s creative and entrepreneurial efforts from being unduly hampered as they
might be if the project was given to organizational units with vested interests in certain technological options
or if project resources are shared part-time with other activities. The best way to protect the project from these
influences is to set it up as an autonomous unit.
The more a project requires integration, the more it should be separated from the existing organization and set
up as a separate unit.
The amount of integration a project requires is a function of several factors.
• The number of components. The more components there are to a project, the more effort that needs to
be spent on integration. The term components refers to physical parts or systems, to different functional
contributions (e.g., marketing, finance, production), as well as to different vested interests of
stakeholders (e.g., environmental impact, economic development, technology transfer).
• The degree to which the project’s components are different from each other. These differences may
be differences in functional specialization—for example, marketing, production, and financial
components of a commercial project—or the differences may originate from the different technologies
used in producing the different components or subsystems of a physical product. The differences may
even stem from the national origins of those contributing to the project. Whatever the basis on which
project components differ, these differences make integration more difficult and thus increase the level
of integrative effort required on the part of the project manager.
• The level of interdependence among project components. If the project components can be produced
separately and independently from each other, then the project manager can establish the specifications
for each component and have them produced without personally needing to invest heavily to integrate
them into a final product.
Independent project teams are very powerful integrating mechanisms, whereas ongoing organizations are very
poor at obtaining the cooperation between departments that is necessary in order to ensure that their various
contributions will be well integrated to produce a coherent end product. Therefore, if a project requires
considerable integrative effort, then it should be set up as a separate and independent unit. Organizationally
and physically separating the project’s resources from the existing organization greatly reduces the required
level of integrative effort.
If, however, the project can be executed almost entirely by one existing organizational unit and little
coordination is required to integrate the contributions of others, then the project can be assigned to the
appropriate unit. Likewise, if the project can be broken down into independent subprojects, each of which can
be executed by one existing organizational unit with little coordination with other units, then the level of
integrative effort required is low and the project can be managed as several independent subprojects within
existing units. A project manager or project coordinator might still be necessary to ensure a minimal level of
coordination.
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The more complex the project’s external environment and the more a project’s success is dependent on this
environment, the more the responsibility for management of external interfaces should be assigned to a
project manager in an autonomous unit.
-----------
The argument concerning relations with the external environment is quite similar to that regarding project
internal coordination or integration, as discussed in the previous point. In fact, here it is again a question of
integration, but in this case, the integration between the project and its external environment.
Several factors contribute to environmental complexity and the project’s dependency on its external
environment.
• The number of external interfaces that must be managed. As this number increases, it becomes more
difficult to manage the external environment coherently.
• Uncertainty. If the external environment is predictable, then it is much less complex an interface to
manage.
• Dependency. If the project is dependent on the external environment for resources, authorizations,
permits, or the clarification of project content, then managing external interfaces is more critical and
more complex.
• Hostility. If segments of the external environment are hostile to the project, then the management of
external interfaces with these segments, with the media, or with other groups that might be influenced
by hostile actions becomes very critical and very complex.
Relations with the external environment are generally managed better if the project manager in an
autonomous unit is given overall responsibility for managing external interfaces, than if the responsibility is
diluted and shared with several stakeholders in the parent organization. Centralizing overall responsibility in
the hands of the project manager ensures more coherent relations with the environment, while setting up an
autonomous unit reduces interference from the hierarchy in the existing structure.
The greater the need to meet severe budget and/or time constraints, the more the project should be separated
from the existing organization and set up as an autonomous unit.
Projects with very tight budgets and/or schedules have a better chance of meeting these constraints if they are
set up as autonomous units for several reasons.
• Visibility of results. Increased visibility facilitates the monitoring of results both by the project team
and by upper management.
• Better control of resources. Focusing decision authority with the autonomous project manager and
project team allows much better control of resources than if this authority is diluted and shared with
several managers in the parent organization. Better control of resources leads to more flexibility and
adaptability in their use.
• Clear objectives and priorities. The autonomous project has only its own objectives to pursue. When
it is autonomous it can pursue these with a minimum of conflict of priorities with the organization’s
other objectives.
• Isolation from interference. The autonomous project organization is less vulnerable to interference
from the hierarchy of the existing organization.
• Quicker and better. The autonomous project manager and project team have better and quicker
access to project information and with appropriate decision-making autonomy can react more quickly
to changing situations than the parent organization can. This results in faster and better decisions that
are particularly critical in attempting to meet tight schedules and/or budgets.
The more constant the resource levels required by a project, the more economical and practical it is to
dedicate resources to the project and thus create an autonomous project unit.
If resource loading varies considerably throughout the project life cycle, then setting the project up as an
autonomous unit may result in inefficient use of resources and in considerable effort being spent on managing
their mobilization and demobilization. More constant resource requirements would reduce these problems and
make the setting up of an autonomous project organization more feasible.
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• Project manager’s role and status. If a project manager is assigned full-time to a project, he or she
Title
has greater autonomy than if his or her time and attention must be shared with other priorities. In
addition, if the project manager is to operate with a high degree of autonomy, he or she should report
directly to the highest possible level in the hierarchy or have direct access to upper management.
Finally, the greater the autonomy required by the project, the more pervasive and complete should be
----------- the project manager’s authority and responsibility for the management of external interfaces (client and
other stakeholders, suppliers, regulators, media, etc.) and for the coordination of various contributing
departments within the parent organization. Any dilution of that authority would most probably result
in added coordination requirements and organizational risk.
• Project manager’s control over resources. The degree of project manager autonomy is largely
determined by the degree of authority over resources. Although there are many possible indicators of
that degree of authority, we believe that the following are generally the most useful.
• The proportion of human resources fully dedicated to the project under direct supervision of
the project manager
• The project manager’s degree of control over the resource selection process (internal and
external) and over their management (job description, remuneration, evaluation)
• The project manager’s control over the budget allocation process and the level of his or her
discretionary power over procurement and authorization of expenditures
• Project manager’s control over project content. The greater the project manager’s control over the
technical content of the project, the greater the autonomy of the project organization. This degree of
control over project content can be determined by the following three indicators.
1. The degree of project manager control over technical decisions, and particularly over
trade-offs
2. The degree of project manager control of the content of mandates assigned to various units of
parent organization and of contracts allocated to other organizations
3. The degree of project manager control over changes in project content
• Project manager’s degree of operational autonomy. This last organizational parameter deals mostly
with the degree of project proximity to the parent organization in day-to-day operations. The project is
more autonomous if:
• The project uses (or is allowed to use) its own management systems and procedures rather than
the standard systems and procedures of the parent organization (project planning and control
system, procurement procedures, etc.)
• Resources that make significant contributions to the project are physically located together to
maximize project identification and minimize coordination efforts
• The project is physically separated from the parent organization
Implementing an appropriate level of autonomy for a project requires management to make a decision on each
of these parameters.
The complete decision process requires that management assess the existing organizational structure, the
organizational contextual factors, and the factors specific to the project. It must then make decisions as to
whether or not a separate unit is to be set up to manage the project. And if this is done, it must decide on the
appropriate level of autonomy for the project. In implementing the desired level of project autonomy,
management must make a series of operational and policy decisions, each of which impacts on the level of
autonomy that the project experiences. This decision process is illustrated in Exhibit 7-10.
Thus, the project organization is not completely autonomous from the parent organization, but nevertheless, it
represents, for this organization, a major departure from the usual way of organizing and managing projects.
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Title
Chapter 8
Flat, Flexible Structures: The Organizational Answer
-----------
to Changing Times
Paul C. Dinsmore
Dinsmore Associates
Company organization structures that are purely functional or purely projectized are becoming relatively rare.
Because of the pressure set off by constant external change, more commonly found are organizations with
characteristics similar to the classic matrix formation used in managing projects. While these organizations
may carry strong functional or project overtones, the interconnecting web of relationships and responsibilities
characteristic of matrix philosophy is always present. This evolution has come about as companies have
scrambled to survive and subsequently positioned themselves to gain competitive advantage.
This chapter discusses the evolution of matrix structures traditionally used for managing projects toward the
FFS (flat, flexible structure), which is proposed as a companywide solution to deal with rapidly evolving
change.
The change toward flatter, more flexible structures on a companywide basis is normally made through drastic
organizational measures. These changes may be made all at once or over a period of time. Here are some
common top management actions that contribute to creating these “leaner and meaner” organizations.
• Reducing middle management numbers at dramatic rates (downsizing to as much as one-third the
previous number of managers)
• Cutting back the number of management levels by as much as 50 percent
• Giving importance to position titles and organization ranking
• Taking strong measures on a companywide basis to trim costs
• Injecting breakthrough technologies in information and communications into the organization
• Expecting professionals to perform more creative and dynamic roles
These actions represent pieces that compose the FFS organizational puzzle. Each contributes toward creating
a more agile structure and more responsive organization. Yet making the change to the FFS is not an easy
one.
Optimizing resources X X
”Fuzzy“ boundaries of responsibility X X
Adaptable to new situations X X
Companywide structure X
Dual-focus project settings X
Conflict-prone X X
Consensus-based decision process X X
Requires training in managerial behavior X X
May be used in downsizing organizations X
Synonymous with ”lean and mean" X
organizations
Multiple-project ambiguous settings X X
• Although top management and direct, production-related employees favor “lean and mean”
organizations, middle managers tend to resist the change.
• An FFS may not be applicable in all situations; a setting of change, ambiguity, and multiple projects
is a prerequisite.
• Tools used in an FFS call for multiproject planning, scheduling, and tracking capabilities that can
adjust to constantly shifting scenarios. Such capabilities must exist in the company.
• Moves to the FFS are not always crowned with glory. Failure results when structures are improperly
designed or training is inadequate.
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It takes persistence and the right combination of change-making facilitators to achieve the goals of
organizational change. Each organizational setting calls for a tailormade approach.
Conclusion
The FFS approach expands the free-flow of the traditional matrix concept to a corporate level in search of
establishing a rapid response to the expanding customer-driven market. The intent in establishing the FFS is
much the same as that of the matrix organization: to create a more responsive and resource-efficient
organization. Although the FFS and matrix organizations are not implemented on the same scale or for the
same purpose, the culture that results from implementing each is basically identical.
Both the FFS and matrix are effective to the extent that they are handled as behavioral change model. When
that concept is grasped, the move to less structured, more agile organizational models becomes a simpler task,
involving adjusting employees' behavioral patterns to the requirements of “leaner and meaner” organizations.
Once the organizational behavior has been adjusted, the “structure” itself loses some of its relevance. The
organization begins to follow the newly defined behavior, not because it has been so “designed” structurally,
but because organizational change toward a more flexible form has taken place. This trend toward flat,
flexible structures calls for expansion of the traditional matrix concept to application on a companywide level
and the use of all the necessary organization change tools for the company to make the transition to a more
dynamic organization.
Bibliography
Graham, Robert J. Project Management as if People Mattered. Bala Cynwyd, Penn.: Primavera Press, 1989.
INTERNET. Management by Projects. 10th INTERNET World Congress Proceedings, Vol. 1, Vienna, Manz
Verteg., 1990.
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Section IV
Planning the Details of Project Management
----------- Chapter 9
Paradigms for Planning Productive Projects
Richard E. Westney
Spectrum Consultants International, Inc.
Projects are the method by which organizations change, improve, introduce new products, and ensure
competitiveness. If a company fails to perform project work well, its eventual demise is virtually ensured.
Project planning is therefore a manager’s job. A manager must make certain that the organization and systems
are in place to ensure project success, that problems have been identified and corrective actions taken. Yet
many managers who should and could plan their projects do not do so. Instead they delegate that
responsibility to others.
Managers who delegate too much planning responsibility are unilaterally disarming themselves of one of the
most powerful weapons in the project manager’s arsenal. Are they irresponsible? Or are they just unaware of
the numerous new paradigms for planning that are provided by personal computer programs?
What are these new paradigms for planning? This chapter describes the numerous ways that today’s managers
can take advantage of personal computer software to gain the power of computerized planning in a way that is
appropriate for a manager’s use.
Task Planning
The manager who focuses on task planning is most interested in defining what work is to be done and when it
is to be done. Personal computer software today provides the following paradigms for task planning:
• Outlining
• Work breakdown structure
• Interactive network drawing
• Bar charting
These task planning paradigms all attempt to provide an easy way to think as a planner: to define a project in
terms of a sequence of required tasks.
Planning by Outlining
Outlining is perhaps the easiest and most intuitive method available for planning. It closely follows the way
most managers think: Define a problem in broad terms and then refine different aspects as appropriate.
Perhaps the greatest advantage of the outlining paradigm is that it helps a person get started in defining the
plan: Once started, the rest seems easy.
To illustrate the outlining method, let us imagine a project to develop a management system. The planning of
such a project might begin with an outline like this:
Phase I: Define Requirements
Phase II: Define System Specification
Phase III: Develop and Test Programs
Phase IV: Document, Test, and Train Users
In this example, each heading represents a phase of the project. Headings could also be used to group
information by area, group, or system. At this point, headings are input with only a title; no other data need be
added.
Now each heading is defined in more detail by adding subtasks beneath each heading as follows:
Phase I: Define Requirements
• Interview users
• Review existing practices
• Define problem areas
• Define hardware and software constraints
Phase II: Define System Specification
• Define input and output
• Define required processing
• Evaluate hardware and programming options
• Prepare report and review with users
Phase III: Develop and Test Programs
• Program user interface
• Program database
• Program output drivers
• Test modules
• Test full system
• Beta test with users
• Incorporate user comments
Phase IV: Document, Test, and Train Users
• Prepare user guide
• Install systems
• Conduct training classes
As these subtasks are defined, the software “rolls up” the data to summarize it in the heading. As a result, the
duration, work-hours, and costs of the heading are the sum of the total for all its subtasks.
The outline can be expanded into additional sublevels of detail as the project progresses and more information
becomes available or as various tasks need to be defined in more detail.
An important feature of outlining is that it allows the plan to be represented at different levels of detail. For
example, a management-level presentation would show only the main headings, a presentation for discussion
of Phase I would show only the details of Phase I, and a detailed planning meeting would use a display in
which all headings and tasks are shown.
In addition, outlining programs allow headings and tasks to be input in any order that they occur to the
planner and then be moved up and down or in and out on the outline. The input data for each task may include
the duration, resource requirements, costs, and descriptive notes.
The next step in outlining is to define the constraints (i.e., dependencies) between tasks and headings. This is
also usually done on the outline format by highlighting the predecessor and successor tasks. Note that the
ability to define constraints between headings (e.g., all the subtasks for Phase I must be complete before Phase
II can begin) often results in a simpler plan with fewer constraints.
Once the outline is complete, the planning process proceeds in the manner of traditional critical path method
analysis. Most software presents a network diagram and bar chart derived from the outline data.
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A good rule for effective planning with networks is to keep them simple. When the total number of activities
exceeds fifty, the value of the network as a tool for communication diminishes greatly. Networks can be kept
simple, even for very large projects, through the use of subprojects—a capability found in most planning
software.
This is such a familiar format that many planning programs provide it as a paradigm for planning, even
though a bar chart does not usually show the essence of a plan: the dependencies between tasks.
In the bar chart paradigm, the planner defines tasks and their dependencies and sees the result instantly
represented in the form of a bar chart schedule. A network diagram, showing the dependencies, is usually
available as an alternative view.
Bar chart planning is also aided considerably by the use of the graphical user interface that allows the length,
position, and appearance of the bars to be varied easily. Bar charting is also frequently displayed together with
outlining. (See Exhibit 9-3.)
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Plans and schedules are useless unless the resources are made available to do the work—when and where
required. Managers therefore rely on resource planning to define:
• Realistic project schedules—consistent with the organization’s ability to provide resources
-----------
• Work schedules for different resources
• Organizational plans—hiring or restructuring
Resource planning information is most commonly represented by a resource histogram. (See Exhibit 9-4.)
The resource histogram can be thought of as a schedule of resource requirements, just as a bar chart is a
schedule of tasks. Any change in the task schedule results in immediate change to the resource histogram, and
vice versa. Therefore, it is also useful to view the project as a combination bar chart-histogram. Some
programs allow manipulation of the bar chart so that one can see the effect on the histogram.
When working with resource histograms and bar chart schedules, the technique of resource leveling is useful.
This allows the manager to input the limits of availability of a resource and have the program calculate a
schedule that is achievable without exceeding those limits. Today’s programs not only carry out the leveling
calculation, they also show the delay (if any) on each task caused by the lack of resources. Since the result of
resource leveling is not optimized—that is, there may be extensive periods of unused capacity—the manager
usually interacts with the program to experiment with different scenarios until an acceptable solution is found.
Assignment Scheduling
When a manager considers the tasks that must be performed, the resources that are to perform the tasks, and
the schedule for doing the tasks, he or she is actually thinking in terms of assignment scheduling. We can
define assignment scheduling as defining:
which specific resource
will perform which specific task
using which skill
Exhibit 9-3. Bar chart schedule.
Since AI cannot take the place of human judgment—and this is especially true in the complex arena of
matching resources to tasks—the assignment modeling method provides two ways for the resource manager
to insert his or her own judgment. The first way in which the manager can affect the AI calculation is in the
definition of preferences that allow the AI rules to be tailored to different situations. For example, one
manager might make assignments so that the most projects are completed in the least time, whereas another
might want to accomplish the most work for the least cost. The second way in which the manager affects the
solution is through direct interaction. This could include specifying the resources to work on a task, locking in
one or more resources once the task begins, defining overtime or weekend work, and changing scheduled
vacations and leaves.
The result of the assignment modeling calculation is an assignment schedule that can be displayed graphically
as seen in Exhibits 9-6 and 9-7. Thus, assignment planning provides a new paradigm for planning from an
assignment perspective.
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Title
Chapter 10
Work Structuring
----------- Darrel G. Hubbard
Management Analysis Company, Inc.
Managers, like craftspeople, require tools to perform their work. Craftspeople use physical tools and skill;
managers use administrative processes and techniques. In management, as in a craft, improper or inept use of
a tool creates lost time and wasted resources, while masterful use of a tool maximizes resource application
and the efficient use of time. Many of the business management techniques that allow us to cope in a
changing environment and that simultaneously support the need for control by management are based on one
premise: Break “it” down (whatever “it” may be) into manageable pieces. Founded on the concept of
cascading analysis, this management technique takes and dissects the entire “it” into successively lower levels
of detail until management control is possible and, in most processes, until the level of breakdown can be
quantified. This analytical concept is used in many project management areas, including:
• Business management: Management by objectives
• Administrative management: Plan, policy, and procedure hierarchy development
• Project control: Work breakdown structuring
• Software management: Structured systems design
A project is goal- or objective-oriented and is defined by the technical or operational objectives to be
achieved. It is a specific task that is unique, complex, time-limited, and resource-limited and is composed of
many smaller interrelated tasks. The key to organizing and interrelating these tasks is structuring the work.
One of the most useful management skills, therefore, is the ability to organize the many tasks required in any
process or project, and one of the first project management tools to be used in project planning is work
structuring. In project management tools to be used in project planning is work structuring. In project
management this involves taking an entire job—the project—and breaking the work effort down into small,
manageable segments such as work packages, tasks, and activities.
Work structure planning in a project environment can best be described as the function of (1) selecting the
project objectives; (2) establishing a predetermined course of action; and (3) creating the structures of
policies, plans, procedures, and work tasks necessary to achieve the objectives within a forecasted
environment. The degree of detail required for this depends upon the complexity of the project and the level
of management visibility chosen to ensure adequate project control.
Work structure planning is a decision-making process because it involves choosing among alternatives. Work
structuring serves to organize the project by defining all the processes and tasks that must be performed in the
conception, design, development, fabrication, construction, and testing of the project, hardware, software,
facilities, or services. The work structure is prepared at the earliest possible point in the project life cycle. At
the same time, formal change control procedures are established to ensure the project’s currency and
accuracy. This process eliminates the need for personnel to be able immediately to comprehend and structure
complex problems involving interacting factors while they are in the process of performing work.
The work structure must fulfill all the work definition and control needs, while at the same time
accommodating the numerous business and organizational factors of a competitive environment. To be
successful at this process, project managers must understand why work structures are prepared; what benefits
work structures provide; what effect business influences have; how and by whom work structures are
developed; and how work structures can be used by project and functional managers for effective work scope
planning, performance measurement, and change control.
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As a management tool, the work structure provides several benefits. First, it allows total project work to be
structured as a summation of subdivided elements. This is accomplished by:
• Uniquely identifying and hierarchically relating the tasks, services, hardware and software products,
-----------
and facilities needed to accomplish project objectives
• Describing detailed tasks required for engineering, licensing, research, development, construction,
installation, demonstration, operation, or production of the facility, unit, plant, major items, or product
• Defining the relationship between the elements
The work structure establishes responsibility for all work. This is done by:
• Assigning responsibility for accomplishing work structure elements to specific performing
organizations and individuals
• Identifying responsible organizations for each work structure element and thereby preventing gaps in
responsibility assignments
Planning, budgeting, and scheduling is facilitated by:
• Providing a method for clear definition of the project scope early in the project life cycle
• Linking objectives and work to resources in a logical manner and providing a basis for allocation of
resources
• Interrelating scope, cost, schedule, and productivity on a work structuring basis, thereby enabling
scope, cost, and schedule to be integrated
• Helping to identify work requiring special attention, such as replanning or additional breakdown
Performance measurements are obtained by:
• Making the structure the basis for meaningful schedule and cost status reporting, monitoring, and
coordination, thereby ensuring that all work to be done can be compared to a well-defined baseline
• Using the structure for the orderly summarization of work performance to selected levels of
consolidation
Communication and information reporting are facilitated by:
• Helping all participants to understand the project clearly during the initial project stages by means of
the work structure development process
• Using the work structure as the basis upon which all communication between information systems is
established, and allowing for written correspondence with reference to a single applicable work
structure element
• Using the work structure whenever project information is collected or issued to ensure that all
information collected, reported, and forecasted has a common meaning, regardless of the source of the
information
• Establishing an effective basis on which to establish communications systems, policies, and
procedures
Thus, a properly selected, designed, and developed work structure, with its codes and statements of work,
supplies the common basis for all scope, cost, schedule, and productivity information and forms the
foundation for quality project management for any project. The work structure provides the common
communications link, the common language, and the device whereby diverse users can freely communicate
from the beginning of the project to its completion.
Business Influences
Business influences affect the development of a project work structure more than they affect any other area of
project planning and control. Business factors that influence selecting and creating a work structure include
various needs for assigning performance, performance measurement, desired level of client/owner visibility
versus performer’s needs, required degree of control, and required amount of cost identification. Other
business factors that influence the framework of the work structure include project phases and project type or
a mixture of project types. As various factors are added, the complexity of the methodologies required to
develop a work structure increase. These items are reviewed and analyzed, and their influence on the
configuration and content of the work structure is established.
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The primary prerequisite to the preparation of any work structure is the clear understanding and statement of
project objectives. Work structuring can be used to reach such diverse objectives as lowering costs,
eliminating jurisdictional work disputes, or lowering scrap factors. Therefore, the first step in designing a
----------- work structure is to identify, determine, and define the project objective and overall project scope. Once
established, the overall project objective provides insight and guidelines for identifying the project
subobjectives. The work structure is then subdivided into subobjectives with progressively finer divisions of
effort. These subobjectives interact to support the overall project objective in the same manner that
subsystems support a total system capability. By defining subobjectives, greater understanding of the work
and clarity of action are added for those individuals who perform the work. This process of identifying and
defining subobjectives assists in structuring the contributing elements during work structure preparation.
Development Responsibilities
The preparation of the work structure plan is the responsibility of the project manager in accord with senior
management directives. The project manager is responsible for developing the complete task structure and
element definition for all project-related work. To prepare the project work structure, the project manager first
develops the project summary work structure, based on the project objectives and the appropriate summary
work structure elements. Participating organizations supporting the project develop, coordinate, and submit
individual work structures for their work. Finally, the project manager integrates the performers’ work
structures with the project summary work structure to obtain the total project work structure. During the
process of breaking down the project, the project manager, the staff, and all involved managers and
contractors are forced to think through all aspects of the project.
Top-Down Approach
Work structures are traditionally developed using a top-down approach to ensure that the total project is
planned and that all derivative plans and associated work contribute directly to the desired end objectives. The
work structure is developed using a top-down approach, because projects are developed and tasks are defined
in the same way.
This is particularly true when projects have recently been authorized. When projects have been in existence
for a period of time or when certain tasks are prespecified, there may be a requirement to develop portions of
the work structure from the bottom-up. To achieve the best results for large projects, however, work structures
should be developed from the top-down.
The top level of the structure is defined as the total project scope. This level is then subdivided into finer
sublevels. As the levels become lower, the scope, complexity, and cost of each subproject become smaller,
until a level is reached where the elements represent manageable units for visibility, planning, and control and
where tasks can be accomplished. At the lowest levels of the work structure, individual work packages are
identified (as shown in Exhibit 10-2). The work package is the lowest-level element of an integrated cost and
schedule work structure. A fully developed work package is a single, definable, monitorable, and controllable
segment of work. It is the point at which cost and schedule are integrated, and responsible and performing
organizations can be assigned.
At any level of the work structure, a monitoring element may be identified. This is an element of the structure
chosen to monitor and control a specific portion of the work at or above the work package level (as shown in
Exhibit 10-2). Each monitoring element is a management control point at or below which actual costs and
schedule status can be accumulated. This level is often referred to as the cost account level, and it represents
the work assigned to one responsible organizational element.
The outcome of top-down structuring is information flow and summing patterns designed to be compatible
with anticipated project management requirements.
The development of the work structure must take into account the fact that the creation of work definition,
cost, and schedule information is evolutionary: Tasks further out in time mature or become more detailed and
precise as the project progresses. All project work must eventually be planned and controlled through fully
developed and detailed packages of work. The work package size should be small enough to permit realistic
estimates, but not so small as to result in excess control costs. However, such detailed planning cannot usually
be produced at the beginning of the project.
The rolling wave work planning concept acknowledges that a person or organization has a sufficient depth of
information to plan in detail today’s work (the near term), but lacks that depth of information about tomorrow
(the future). Therefore, those future tasks are planned and scheduled at a more summary level starting with
planning packages. A planning package is a logical aggregation of work within a higher-level work structure
element. As the project progresses and information matures, more detailed scope, schedule, and cost estimates
are developed, and the summary tasks are broken down into multiple lower-level tasks and finally into work
packages.
Content
The overall design of the work structure is the key to an effective working project control system. Therefore,
the work structure must be carefully studied from an information input and output point of view. The structure
must be based on the most likely way the project will be worked, managed, and controlled. Critical products
or services to be subcontracted should be identified and treated as individual elements. An element or series of
elements applicable to support tasks (such as test equipment, spare and repair parts, transportation, and
training) should also be included.
Each work structure element must be a meaningful grouping of related tasks and a unique, single, definable,
goal-oriented segment of project work. Each element must be able to be summed without allocation with
other related work structure elements, in a logical manner, to the work structure element above it, thereby
providing defined scope, schedule, and cost parameters for all elements of the work structure. Each
summary-level element must be meaningful from the viewpoint of project control, such as how the work will
be controlled, performed, and/or contracted.
Structure and account codes must be applied to the work structure element to ensure that relationships are
meaningful and summarization is possible.
In developing the project work structure as a communications tool, the work structure must be defined with
regard to all the base elements that are required to make it a working entity: project objectives, structure,
coding, and reporting. Before integrating these elements, each must be analyzed separately, and then the
relationships of the elements to each other must be studied. The design of the structure, the codes, and the
reports should contain as much input as possible from the performing and responsible groups that will be
using them.
Types of Structure
The approach to the design of the work structure and its development depends upon the management and
contracting philosophy adopted. Five primary work structures can be considered for use on most projects: The
work structure can be oriented toward (1) products, or end items, (2) contracts, (3) systems, (4) phases, or (5)
facilities. The work structure may also be a combination of these structures. The structure is usually displayed
in a tree formation representing the hierarchical components of the project.
Level of Detail
The number of subdivisions in the work structure varies according to the complexity of the work. The work is
progressively and logically subdivided into manageable tasks down to the levels where work will be
monitored and controlled (a monitoring element) and/or performed and statused (a work package). The work
is subdivided to a level at which tasks are assignable, identifiable, and manageable by the organizational units
performing the work. For example, the work structure for a hardware end-item system would be subdivided
further than that for a training process.
The reasons for the different levels of detail are often quite subtle. Engineering and manufacturing planning
and control and, thus, configuration management require a level of subdivision that identifies all of the
configuration items. However, the level required for assignment and control by the performing organization is
usually higher than the level required for detailed planning of configuration items. Regardless, the work
structure must be identical for configuration management and project control purposes and must be detailed
until that level in the structure is reached. The level of detail should be clearly defined so that no duplication
of effort occurs within or between performing organizations.
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Title Integration
The project control process is built on the concepts of integrating data related to scope, performing
organization, schedule, and cost and of producing performance measurements by assimilating and evaluating
all information on a common basis. Therefore, each work structure element must interface with the
----------- organization responsible for accomplishing that element. Flexibility must be provided to establish these
interfaces at meaningful and appropriate levels. Otherwise, existing management systems and management by
those assigned responsibility may be impaired. Whatever type of planning and control technique is used, all
the important interfaces and interface events must be identified. To integrate project data properly, five major
interfaces to the work structure are established in developing the work structure design:
1. Work structure/organization relationship
2. Work structure/schedule relationship
3. Work structure/cost relationship
4. Work structure/technical relationship
5. Work structure, cost, and schedule interrelationships
Statement of Work
A major part of defining and structuring the work for a project is the preparation of a statement of work
(SOW), which provides the detailed descriptions of work contained in each element of the work structure. The
reason for producing SOWs is to provide a careful documentation of each work structure element with regard
to scope, schedule, cost, resource requirements, and technical requirements so that all users have a common
understanding of the content and meaning of each work structure element.
The descriptions must indicate what materials, equipment, facilities, people, and other resources are
necessary. The description of work must be clear and concise and capable of standing alone as a “miniature
project.” Work must neither be duplicated between work structure elements nor should any project work be
omitted. Where confusion might be possible, the SOW for each element explicitly states the work that is not
included as well as the work that is included; where other similar work is included, the SOW should reference
the work statement. The work descriptions from the summary SOWs for the upper work structure levels,
together with those from the more definite monitoring element SOWs and the detailed SOWs for the work
packages, provide a basis for checking the work structure.
Iteration, Revision, and Maintenance
The work structure development process is iterative as the project evolves and contracts are awarded. Work
structure revisions also result from work expansion or contraction with project/contract scope changes and the
movement of a project through various phases (e.g., research, design, development, fabrication, construction,
testing, demonstration, and operation). The approved project work structure is maintained and revised to
incorporate changes throughout the life of the project to ensure that the project work efforts are traceable.
When changes in the project concept, objectives, approach, work scope, or resource levels occur after the
initial work structure has been defined, a formal change process is used to update the structure.
Conclusion
The work structuring methodology for integrated scope/schedule/cost planning and control is a proven
methodology used to manage successful projects. The project work structure is the heart of the project
planning effort. It is more than just an element of the project plan; it is the basic project structure providing
the framework for developing and maintaining cost/schedule planning, budgeting, and data collection, as well
as performance evaluation. It provides streamlined information flow, improvement in communication,
reduction in redundancy, and improved visibility. The work structure is the device by which the users—such
as the owner, contractors, and the government—can communicate among themselves and with the people
performing the actual work.
The work structuring methodologies work equally well with any of the standard organizations used for
projects: functional, pure project, or matrix. The methods and techniques are flexible and may be applied to
varying degrees, depending on the size, needs, and characteristics of the specific project and the desires of the
project manager. If properly applied, the work structuring techniques and methods give project managers and
functional managers a powerful tool to provide and communicate all needed project information.
Management-directed project work structuring offers creative technical approaches to project and business
management challenges. It allows management integration of many processes, work phases, and
organizations, and it also ensures integration of scope, schedule, and cost. Management-based work
structuring offers a means for complying with both project objectives and multicompany objectives and can
accommodate ever-changing work priorities. Project managers who employ work structuring as a key
management tool increase efficiency on their projects and gain a more competitive contract edge.
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 11
Project Management Plans: An Approach to
-----------
Comprehensive Planning for Complex Projects
David L. Pells
Strategic Project Management International
Preparation of a project management plan (PMP) is a simple, straightforward approach designed to promote
and ensure comprehensive project planning. The PMP is a combination of two plans that are often prepared
separately: the traditional management plan, which describes operational management systems and
approaches, and the project plan, which includes the work breakdown structure (WBS), logic, schedules, and
cost estimates. PMPs are intended to be more comprehensive than either management plans or project plans.
They reflect an awareness that the people, the system, and the detailed planning are all critical to project
success.
This chapter provides an introduction to PMPs. It outlines PMP contents, including traditional issues such as
work breakdown structures, critical path networks, Gantt charts, and earned value. It introduces new ideas
such as planning for organizational development, health and safety planning, and risk planning. Most
importantly, it provides a framework for comprehensive project planning.
The project management plan typically contains seventeen items. They are:
1. Introduction/Overview
2. Mission and objectives
3. Work scope
4. Planning basis
5. Work breakdown structure
6. Organization development plan
7. Resource plan
8. Procurement and logistics plan
9. Logic and schedules
10. Cost estimates, budgets, and financial management
11. Risk analysis and contingency plan
12. Quality and productivity plan
13. Environmental, safety, and health protection plan
14. Security plan
15. Project planning, control, and administration plan
16. Documentation and configuration management plan
17. Appendix
This chapter discusses these items, with descriptive information as well as suggestions as to how to address
the topics during the planning process and what to include in the project management plan.
Introduction/Overview
The PMP introduction/overview includes an introduction both to the specific project and to the PMP
document itself. Some background information may be included to set the stage or to provide perspective on
the information that follows, such as how the project was initiated, who the customer or sponsor is, how the
project is funded, or other critical factors that are important to those who read the PMP. Introductions are
always short, allowing the reader to move into the remainder of the PMP quickly but with initial perspective.
Additional external or historical information can be referenced or included in the Appendix.
External factors important to the initiation or health of the project should be discussed. External factors may
include general or specific economic trends, constraints, or opportunities; political or governmental
conditions; population demographics; or internal organizational factors.
Work Scope
The work scope section of the PMP is the heart of the plan. It demonstrates how well the project is
understood. This section includes narrative descriptions of all elements of the project’s scope of work. It
clearly identifies the products or services to be provided to the customer. The statement of work contains
enough information to allow development of the work breakdown structure, schedules, and cost estimates, as
well as assignment of responsibilities.
The work scope section can address the project phases and include special plans associated with those phases,
such as the R&D plan, engineering/design plans, construction plan, manufacturing plan, facility start-up plan,
or transition plan. The work scope section may also describe the systems management activities, including
systems engineering and integration, to ensure project life cycle perspective. In other words, it shows that the
activities necessary to ensure that the design and final products meet customer requirements are all planned
and managed properly and can be integrated and operated as intended, and that start up, transition, operation,
and completion activities are also planned and managed properly.
To simplify preparation, the work scope can be prepared in outline form, which can then be used to develop
the WBS. Often the WBS and work scope are prepared in parallel, with the resultant narrative description of
the work called a WBS dictionary.
Planning Basis
The planning basis section provides for the documentation of key approaches, assumptions, requirements, and
other factors considered during preparation of the PMP. The following topics are addressed in this section:
• Project deliverables/end products
• Requirements
• Constraints
• Approaches/strategies
• Key assumptions
• Specifically excluded scope
A list of all products, documents, and services to be delivered to the customer over the life of the project is
required. When the project is being performed under a contract with the U.S. government, this list may be
prepared during contract negotiations and attached to the contract itself. Every project manager, however,
should have a complete list of project end products, in order to ensure delivery of those items on schedule.
Requirements
Requirements are specifications or instructions that must be followed during project performance. They may
include technical requirements, facilities requirements, data requirements, management requirements, or
special instructions. Technical requirements may include codes, standards, laws, engineering or design
specifications, models, or examples for mandatory or recommended compliance on the project. When there
are mandatory requirements, such as laws, these must be identified and listed, or project performers run the
risk of noncompliance and legal prosecution.
Facilities requirements include an initial assessment of types, amount, and quality of facilities needed for the
project, along with related utilities, furniture, and equipment. This provides initial bases for estimating
quantities and costs associated with those resources. Overlooking facilities issues during project planning
leads to schedule slippages, cost overruns, unhappy project participants, and untold headaches for the project
managers. For small projects, facility requirements may not be a big issue; for larger projects, they can be
critical.
Functional and operational requirements (F&DRs) spell out what the system, facility, or product being
produced is intended to do. F&DRs provide the basis for the engineering, design, and planning of the system,
facility, or product. Where F&DRs exist, listing or identifying them greatly simplifies and facilitates the
design process. Mandatory data requirements, management directives, or special instructions are also
identified and documented during the planning process. Special instructions may include directions from the
customer or upper management or may be spelled out in contract documents.
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Title Constraints
Constraints may include known technical limitations, financial ceilings, or schedule “drop dead” dates.
Technical constraints may be related to state-of-the-art capabilities, interface requirements with other systems,
or user-related issues (e.g., software that must run on certain types of personal computers). Financial and
----------- schedule constraints can be introduced by the customer, lead time associated with procured hardware, or
funding/budgetary limits.
Approaches/Strategies
The approach or strategies to be utilized can have a major impact on subsequent planning. For instance, if all
project work is to be performed within the parent (host) organization, with minimum subcontract support, that
approach impacts planning of resources and organizational issues. If work is to be “fast-tracked” by
overlapping design and construction activities, or by performing more work in parallel, then that approach can
be described. Communication of strategies to project participants can be done effectively by devoting several
paragraphs to that topic in this section of the PMP.
Key Assumptions
Every project is planned under some degree of uncertainty. Therefore, assumptions are required to estimate
work scope, schedule durations, resource requirements, and cost estimates. Assumptions are also required
when defining the management strategies, systems, and procedures to be utilized.
Major assumptions are to be documented since they can have a significant impact on planning and estimating.
This is true on all projects, regardless of size. Large projects, which involve numerous participants and major
complexities, generally depend on more key assumptions during project planning than smaller projects. The
major reason for documenting key assumptions is to provide the project manager with a basis for revising
plans when the assumptions are changed (i.e., when a customer changes his or her mind).
This subject is included for communications purposes, but it may also be needed to limit the scope of work. It
is intended to highlight specific and relatively obvious issues, such as documentation, training, or follow-on
support, which customers often assume but which cost money and have not been included in the project plan.
Clarification of these scoping questions saves headaches later, in some cases even avoiding litigation.
Organization Structure
While not all participants may be involved during early project planning, key positions and participating
organizations are identifiable fairly early. A preliminary organization structure in graphic form can be
prepared and included in the PMP. Where possible, names, titles, and phone numbers are included on the
chart, to promote understanding and communication. Organization charts are dated but not finalized until
resource allocation plans are prepared, based on detailed work planning and cost estimates.
Responsibilities
Specific responsibilities of individual project participants are defined as clearly as possible, to promote
communication and teamwork and to avoid confusion. For large projects, responsibilities of positions or
participating organizations are defined and included.
Authorities
Much has been written about the “authority versus responsibility” issues in project management, especially in
matrix organizations. Project managers or other project participants are “responsible” for project
accomplishment without “authority” over the resources being employed. For all projects, it is helpful to
recognize these issues and document procedures for resolving conflicts as necessary. For larger projects,
authority levels are formally established for key positions in the project organization and documented in the
PMP. Where multiple companies or organizations are integrated into a project organization, contract
relationships are referenced or defined, as appropriate. Procedures for resolving problems related to work
direction may also need to be established. This section of the PMP provides an opportunity to document and
communicate plans and procedures that reduce conflict in these areas.
Interfaces
On projects involving technical activity, it is common for personnel from the customer’s organization to talk
directly with technical staff in the project organization. However, when multiple project participants are
interfacing with outside entities—either customer representatives, the general public, the press, or others—it
is easy for conflicting information to be transmitted. These interfaces can generally be identified and
controlled, normally via procedures or established protocols.
On large, complex projects, it is fundamental to identify interfaces among project participants. Clearly
defining interfaces highlights where communication is needed and which areas may cause potential
communications problems. Interface planning reduces these problems.
Personnel Development
Skills and techniques related to teamwork and effective communication can be critical to a project’s success,
allowing problems to be solved, schedules accomplished, and objectives met. Many of those skills and
techniques, however, may be new or difficult for new project participants. This is an issue common to all
large projects.
This section of the PMP outlines the types of training and team-building activities planned for the project.
Simply establishing a plan in this area can be enormously important, as it points out that the project leaders
are aware of the issue and plan to improve communication, teamwork, and productivity on the project. In
addition, other types of training are necessary on projects, especially if the project utilizes technologies,
equipment, systems, or approaches that participants are not familiar with.
Resource Plan
The resources needed to accomplish the project—including personnel, supplies, materials, facilities, utilities,
and information/expertise—are identified in this section of the PMP. The availability of those resources also
needs to be determined, that is, when the resources are needed and whether they are available when required.
For example, the expertise needed for the project may not be available within the organization and may need
to be found outside, via hiring, contract, or partnership. Materials required may be available only “on the
other side of the world,” requiring additional planning, time, and expense to secure.
The primary resource planning issues are:
• Identification and qualification of the resources required
• Availability of those resources
• Quantification, or amount, of the resources required
• Timing, or “allocation,” of the resources needed
Identification and availability of resources are addressed in this section of the PMP. Quantities and timing of
those resources are established during the cost-estimating process and finalized after schedules have been
defined. Pricing of resources is how cost estimates are established and becomes the basis for project budgets.
However, preliminary estimates of resources required and projected dates needed are included in the PMP,
then finalized when cost estimates and schedules are established. Because of inflation, cost of capital, and
other factors, accurate pricing of resources cannot occur until resources have been scheduled, so this process
is also fundamental to the cost-estimating process. Resource allocation is also normally included in the cost
estimate section of the PMP, in the form of a time-phased cost estimate.
Procurement and Logistics Plan
Advance planning of the contracting and procurement activities is particularly critical on large projects. In
addition, logistics issues related to major equipment, supplies, or materials need to be planned in advance to
ensure manufacturing, transportation, and storage by cost-efficient, safe, and timely means. This section of the
PMP includes the following:
• Subcontracting plans
• Procurement plans
• Logistics plans
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Subcontracting activity has a direct effect on project costs, schedules, and overall success, so it normally
receives attention early in the planning process. It may be directly related to the original structure of the
project organization if, for instance, joint ventures, consortia, or other partnering arrangements are established
----------- to perform a project. A primary contracting organization may have overall project management and planning
responsibilities, but one or more other subcontractors will perform portions of the project. In those cases, the
subcontracting arrangements are planned early, or project work can be delayed.
An early planning activity is identifying major subcontracts needed to accomplish project work. This occurs
during the resource planning process. The selection, negotiation, and award of major subcontracts is a
rigorous, difficult, and time-consuming process, involving complex legal arrangements and extensive
documentation and approvals.
This section of the PMP also includes identification of subcontracting laws, regulations, and requirements to
be complied with; identification and description of the major subcontracts anticipated for the project; timing
of those subcontracts; potential problems or issues associated with the contracts; and approaches and expertise
to be employed during the contracting process.
Procurement Plans
The procurement of equipment, materials, and supplies requires planning to reduce the risk of impacting
project schedules and to ensure efficient and cost-effective acquisition. On large projects or projects involving
R&D or manufacturing of new systems, key equipment or parts may themselves need to be developed and
specially manufactured. In those cases, vendors may also go through the R&D, design, engineering, and
manufacturing processes just to deliver the equipment to the project. In cases involving long lead time items,
procurement planning occurs long before the items are needed on the project, in order to initiate the design
and procurement processes for those items. Failing to do so means the equipment or parts will not be available
when needed, causing the project schedule to slip and costs to rise.
Logistics Plans
For construction projects of all kinds and sizes, logistics planning is critical. The timing, transportation,
delivery, storage, and usage of project materials, supplies, parts, or equipment must be planned, coordinated,
and managed for the project to be successful. Unavailability or damage during shipment, storage, or handling
causes major problems at the job site. These same issues apply to any projects involving large quantities of
procured materials or equipment.
This section of the PMP includes plans related to the physical aspects of procurement: when items will be
delivered by vendors; transportation and handling during shipment; warehousing, storage, kiting, and
handling at the job site, including inspection, testing, and acceptance procedures; and distribution to project
participants as needed for completion of project tasks. Systems and expertise needed to track, manage, and
report status on procured items are identified, along with the schedule and approach for establishing those
systems and functions. Responsibilities and procedures are identified and defined.
Network planning is applied to projects during early planning processes, so that activity relationships are
identified, understood, and factored into the schedule. In their simplest form, network plans are simple flow
diagrams displaying the order in which activities are to be performed, which activities cannot be started or
completed before other activities are started or completed, and what activities must be completed before the
overall project is complete. Logical network plans are important for project planning, but they are complex,
detailed, and cumbersome for displaying schedule information. While networks are necessary, they may be
referenced in the PMP or attached later. The PMP, however, should describe the logic applied and establish
networks as the basis for the schedules.
Summary Schedules
The summary schedule corresponds to the upper levels of the WBS and identifies key milestones. Additional
levels of schedules are developed as required and are compatible with each other, the management summary
schedule, and the WBS. Schedules provide information for measuring physical accomplishment of work, as
well as identifying potential delays.
Schedules normally include lists of tasks and activities, dates when those tasks are to be performed, durations
of those tasks, and other information related to the timing of project activities. That information is displayed
in many ways. The most popular tends to be the bar chart, produced by project scheduling software programs.
Milestone schedules are simple lists of top-level events (i.e., the completion of the key tasks or activities) with
planned dates. These same lists are used for reporting schedule progress by adding a column for completion
date information.
Milestone schedules, networks, bar charts, and activity listings are included in the PMP as desired. Detailed
schedules may be provided in the Appendix and referenced in the body of the PMP. They are maintained
current over the life of the project to reflect current working plans. Schedules also normally identify critical
activities so they can receive special attention.
Cost Estimates
The most straightforward method of estimating costs is to use the WBS and schedule. Each element of the
WBS or each activity in the schedule or network can have a cost associated with it. Therefore, the approach is
to go down the list of activities or WBS elements and estimate the cost for each one. Costs are estimated by
identifying the resources needed for each activity, in what quantities, and at what price. The pricing of the
resources depends on the timing, so normally a cost estimate is not finalized until the project activities have
been scheduled.
Budgets
Budgets are cost estimates that have been approved by management and formally established for cost control.
Actual costs are compared to budgets as the project is completed, to identify variances and potential problems
and to provide information on what the costs will be. The budgeting process includes extensive reviews and
revisions of the cost estimates, to arrive at the final budget figures.
Financial Management
The requirements, systems, procedures, and responsibilities for project financial planning, management, and
control are addressed in this section. Financial control includes cash flow management as well as conventional
cost control (standard cost accounting cost performance reporting, and cost productivity assessment).
Cash flow management involves traditional income and expenditure reporting and analysis. On most projects,
funding and funds management are critical, representing the timing at which resources can be scheduled and
work accomplished. Cash flow planning and reporting procedures and responsibilities are established in the
PMP, ensuring that funds are available as needed on the project. Many projects are financed by multiple
customers, government agencies, or organizations, making it necessary to keep track of which money is spent
for which project activities.
Risk Identification
The WBS is used to identify risks associated with specific elements of the project. Each WBS element is
assessed for risk, based on the following:
• Status of technology being utilized
• Status of planning
• Status of the design (project stage)
Risk is higher when new or unproven technologies are required. Greater uncertainty is also expected when all
aspects of a task or project element are not yet planned in detail. Finally, risk is generally higher during the
early stages of a project or task than when nearing completion.
Risk Analysis
Risk analysis includes a detailed discussion of the risk, including both internal and external factors. An impact
table is prepared with factors assigned based on technology status, planning status, and design/project status.
Finally, the potential cost and schedule impact is assessed. The impact table includes a worst-case cost
estimate for each of the project elements included.
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Once the risks to the project have been identified and assessed, strategies are needed to minimize those risks.
Such strategies may include technology development, modeling, demonstrations, peer reviews, replanning,
changes in project logic, reorganization of project participants, or even contractual changes. The idea is to
----------- adapt a proactive, planning-based approach to risk assessment and to minimize project risks through specific
actions.
Changes in technical performance or schedules imply a new look at cost estimates and a reevaluation of
contingency reserves. Risk analysis therefore can be performed in conjunction with cost estimating when
estimates of contingency reserves are calculated. Regardless of the timing, effort, or risks, cost estimates may
be inaccurate for various reasons, such as engineering errors or oversights, schedule changes, cost or rate
changes, external factors, construction or implementation problems, or estimating errors. The amount of
reserves depends on a number of factors, including funds available, overall riskiness of the project, and the
management approach.
While quality may be defined in terms of technical performance of end products, value to the customer is now
regarded as a key measure. Technical quality and customer satisfaction are increased by establishing systems
and procedures for ensuring high performance. That means well-defined project requirements or
specifications, systems for comparing progress to specifications, and effective feedback mechanisms. This
part of the PMP contains or refers to quality management systems or procedures to be utilized on the project.
Quality assurance (QA) is a process of establishing performance standards, measuring and evaluating
performance to those standards, reporting performance, and taking action when performance deviates from
standards. Quality control (QC) includes those aspects of QA related to monitoring, inspecting, testing, or
gathering performance information, as well as actions needed to ensure that standards are met. QA and QC
both require discipline and systematic approaches to defining and measuring technical performance. For large
projects, formal systems and procedures are necessary, and these can be described or listed in this section of
the PMP.
Productivity Improvement
Productivity improvement, or reductions in the time and costs to accomplish project objectives, also calls for
planning and monitoring. Plans, schedules, and cost estimates can be evaluated for process improvements and
efficiencies and performance improvements. Cost-saving methodologies, such as value engineering, can be
applied to designs and technical plans. Cost estimates can be subjected to “sensitivity analysis,” which
identifies areas of the project where the most probable savings can occur. Company procedures, systems, or
processes can be reassessed for improvements regarding paperwork, staffing, or time. New products,
methodologies, or technologies might increase productivity. Employees also may be encouraged to identify
productivity improvements, cost savings, or time-saving processes. This section of the PMP identifies which
of those strategies are used on the project and outlines when and how they will be used.
The PMP contains the project safety plan. Each element of the WBS is assessed for safety issues, including
potential hazards, opportunities for accidents, and government regulatory requirements. The systems,
procedures, and steps to be employed to ensure a safe workplace are also described.
Emergency preparedness involves addressing such issues as fires, tornadoes, floods, power outages, sabotage,
terrorism, and the loss of key personnel. Preliminary planning identifies the people who will take charge in
each type of emergency. Public services such as fire stations, ambulances, hospitals, police, and evacuation
means are identified. A fully developed PMP contains or references plans and procedures for all types of
emergencies.
Security Plan
Every project involves security issues that need to be dealt with in the PMP. The major topics are:
• Physical security
• Property protection
• Information security
Physical Security
Limiting physical access may require gates and fences, guards, electronic access systems or surveillance
devices, badges, or contracted security services. Plans for providing physical security—including
requirements, responsibilities, tasks and activities, timetables, and procedures—are described or referenced in
the PMP.
Property Protection
Property protection against loss, theft, or damage is needed whenever a project involves acquisition or use of
materials or equipment, including hardware, software, vehicles, tools, or other devices. The more important
those materials or equipment are to the success of the project, the more important are property protection
plans, systems, and procedures. Property protection may also require detailed property management
information systems, procurement tracking systems, training, and experienced personnel.
Information Security
For some projects, information security may be the most important security issue facing the project manager.
As a project proceeds, key information is generated, including technical information (i.e., design
specifications, vendor data, engineering data), cost and schedule information, contract-related information,
correspondence, plans, and progress information. This section of the PMP contains the plans for ensuring
against loss or damage of key project information. An information security manager for the project may be
needed to control access to information; to coordinate passwords, codes, and file names; to ensure backup
systems and databases; and to ensure proper usage of procedures and protocols. These issues can all be
included in the security plan.
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The PMP represents the major plan for the project, yet it may be one of many plans prepared—especially if
the project is large, complex, and involves many different organizations.
Management Plans
If more than one management plan is prepared for the project, they are identified and described here. On large
projects a hierarchy of management plans is common, with each participating organization preparing a
management plan for its portion of the project. A table should be prepared identifying all the plans to be
prepared and their relationship to one other.
Project Control
Project control involves procedures, processes, and methods used to determine project status, assess
performance, report progress, and implement changes. In addition, on large projects there may also be the
need for a formal work authorization process, which documents task agreements prior to the start of work.
These issues are addressed in this section of the PMP.
Work Authorization
Work authorizations are documents that describe work to be performed, have cost estimates (or budgets) and
scheduled performance dates identified, and are negotiated and agreed to by a “requesting” organization and a
“performing” organization. Work authorizations are common in large companies doing business with the U.S.
government. The work authorization forms and procedures to be used on a project are described in this section
of the PMP.
Change Control
The procedures, systems, and responsibilities for administering and controlling changes to a project’s work
scope, schedule, and budgets (or cost estimates) is described in this section of the PMP. Formal change
control systems are required to ensure that plans, baselines, design, and documentation are not revised without
appropriate reviews and approvals.
Project Administration
This section of the PMP describes the reports, meetings, and record-keeping processes associated with project
management and administration.
Reporting
Different types of management reports are identified and described here. Formats, procedures, and
responsibilities are outlined and defined for major reports. A list of reports to be prepared, with distribution
and responsibilities identified, can be included in this section or in the Appendix. Reports for both internal
and external distribution should be included.
Meetings
Major management meetings to be conducted are identified, including review meetings with customers or
management, status meetings, change control meetings, and special meetings to transmit key information.
Subcontract Management/Control
This section contains an overview of procedures and responsibilities associated with administering key
contracts on the project. Performance measurement and reporting by contractors is described, contract
requirements identified, and subcontract management activities identified, including site visits, meetings, and
technical reviews.
Document Control
Responsibilities
Responsibilities for dealing with the documents are identified as follows:
• Initial preparation of the documents
• Reviews and approvals
• Changes to the document
• Distribution list
• Storage
A document responsibility matrix is a simple, straightforward method for communicating the plan for
document control. The responsibility matrix lists the documents, then identifies responsibilities for document
preparation, revisions, approvals, distribution, and storage.
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Configuration Management
Configuration management can be defined as the process of identifying and documenting the functional and
physical characteristics of products, facilities, or systems; of controlling changes to those items and associated
documents; and of reporting status of the items or changes to those who need to know. The objective is to
keep project technical documentation consistent with the project systems, products, hardware, or facilities
involved. Where a comprehensive document control system has been implemented, configuration
management can be an expansion of the processes for the technical documents and systems.
Configuration management plans include the following:
• Configuration management requirements
• Configuration identification
• Configuration control
• Configuration status reporting
On projects for government agencies, configuration management requirements may include compliance with
detailed laws, regulations, or contract clauses. This is especially true in such industries as nuclear power,
military/weapons systems and procurement, space-related contracting, transportation, and other areas
potentially involving environmental, health, or safety issues concerning the general public.
Configuration Identification
The technical systems, components, facilities, and products that comprise the project and associated technical
documents are identified in the PMP. These are the elements that define the “technical baseline” drawn from
the WBS. Technical baseline documents consist of the documents associated with research, design,
engineering, fabrication, installation, construction, start up, and operation of each of the technical
systems/components of the technical baseline. This section of the PMP consists of a list of the technical
baseline systems/components and associated documents that will be subjected to configuration control.
Configuration Control
Configuration control involves the procedures for administering and controlling changes to the technical
baseline and associated documents. Configuration control parallels the more general document control
process but places more emphasis on controlling changes to the design and technical configuration of the
system themselves. Control of technical documentation ensures that those documents accurately reflect the
latest status of the technical baseline.
The configuration control section identifies how changes to the technical baseline are made and fixes the
associated responsibilities and procedures for keeping technical documents current. Procedures and
responsibilities are identified in a matrix format along with necessary narrative explanations.
Appendix
The PMP Appendix includes the following types of information:
• Referenced technical data (e.g., technical specifications, test requirements)
• Support exhibits (e.g., detailed WBS)
• Detailed schedules
• Detailed cost estimate support data
• Work package documentation procedures
• Example reports
• Change control charter
• Current working plans
The Appendix provides a place to put supporting information, allowing the body of the PMP to be kept
concise and at more summary levels. In some cases, where a section of the PMP is prepared as a separate
document (for instance, when required by law), it can be included in the Appendix and referenced in the PMP.
Bibliography
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Nostrand Reinhold, 1985.
Cleland, David I., and William R. King, eds. Project Management Handbook. 2nd ed. New York: Van
Nostrand Reinhold, 1988.
Cori, Kent. “Project Work Plan Development.” 1980 Proceedings of the Project Management Institute.
Drexel Hill, Penn.: PMI, 1989.
Dinsmore, Paul C. “Planning Project Management: Sizing up The Barriers.” 1984 Proceedings of the Project
Management Institute. Drexel Hill, Penn.: PMI.
DOE Order 4700.1. Project Management System. Washington, D.C.: U.S. Department of Energy, March 6,
1987.
Humphreys, Kenneth K., ed. Project and Cost Engineers Handbook. 2nd ed. New York: American
Association of Cost Engineers/Marcel Dekker, 1984.
Kerridge, Authur E., and Charles H. Vervalin, eds. Engineering and Construction Project Management.
Houston: Gulf Publishing, 1986.
Kerzner, Harold. Project Management: A Systems Approach to Planning, Scheduling and Controlling. 3rd ed.
New York: Van Nostrand Reinhold, 1989.
Kerzner, Harold, and Hans J. Thamhain. Project Management for Small and Medium Size Businesses. New
York: Van Nostrand Reinhold, 1984.
Lock, Dennis, ed. Project Management Handbook. London, England: Gower, 1987.
Pells, David L. “Project Management Standards at the Idaho National Engineering Laboratory.” Proceedings
of the Northwest Regional Symposium, jointly sponsored by the American Association of Cost Engineers and
the Project Management Institute, April 22, 1988, Vancouver, Canada. Drexel Hill, Penn.: PMI.
Pells, David L., “Project Management Upgrade at the Idaho National Engineering Laboratory.” 1989
Proceedings of the Project Management Institute/INTERNET Joint Symposium. Drexel Hill, Penn.: PMI.
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Title
Section V
Controlling Costs and Keeping on Schedule
----------- Chapter 12
Project Cost Control Systems That Really Work
Ralph D. Ellis, Jr.
University of Florida
In the design and implementation of a project cost control system, the individual characteristics of the
organization performing the project and of the project itself must be considered. However, the following
criteria should be considered regardless of the specific situation:
• Validity. The information reported must accurately reflect actual versus estimated costs.
• Timeliness. The cost data must be reported soon enough so that managerial action can be taken if a
problem arises.
• Cost-effectiveness. Collection and reporting of cost data must be done in a way that does not hinder
project progress.1
Cost control systems can work if they are set up with these criteria in mind. This chapter covers how to design
and implement an effective project cost control system. The examples given are drawn from the construction
industry, yet these same principles are applicable to other types of projects.
The project cost control baseline is developed from the project cost estimate.2 Initially, during the conceptual
phase, the cost estimate exists only as a preliminary or order of magnitude estimate;3 as the engineering
design progresses, more precise estimates of cost can be developed. A detailed cost estimate, based upon
work quantities determined from completed project drawings and specifications, provides the most precise
estimate of cost. It is this detailed cost estimate that forms the basis of the project cost control baseline.
However, the detailed cost estimate often cannot be directly used as a control budget. Usually some
transformation is required. For example, for bidding or negotiating purposes, the estimate may originally have
been organized in a form convenient for the project owner. The project contractor may find it advantageous to
reorganize the estimate into a form that matches his or her cost control preferences. Also, the level of detail
provided by the estimate may not be appropriate for the control budget.
Several factors should be considered when deciding upon the appropriate level of detail for the cost control
budget.
• How many individual cost elements can the office and field personnel be expected to break actual
project costs into for reporting purposes?
• How many individual cost elements can the project management team effectively review and
monitor?
• How can Pareto’s Law be taken into account—that 80 percent of the total project cost is probably
represented by only 20 percent of the cost items?
The answers to these questions and the selection of an appropriate level of detail depends upon the
characteristics of the project and upon the management resources allocated to manage the project. If, for
instance, a cost engineer is assigned to assist the project manager in supervising the collection and reporting
of cost control information, greater detail may be practical. Generally, it is desirable to maintain more detail
on cost items that represent a more significant portion of the project cost.
Consider a project in which structural concrete represents a large percentage of the total project cost. In this
case the structural concrete costs should be broken down into a number of cost subaccounts categorized by
work operation, such as formwork, reinforcing, and concrete placement. Further subclassification by
structural component, such as foundation, slabs, columns, and beams, may also be appropriate. On the other
hand, if only a relatively small percentage of the total project cost involves masonry, then all of the masonry
cost items in the estimate might be transferred to the project cost control budget as a single summary. Exhibit
12-1 provides an illustration of how the project cost estimate information might be transferred to the cost
control budget.
Establishing a standard organizational listing and coding of all cost items is a prerequisite to the preparation
of both the detailed cost estimate and the cost control budget. The standard organization listing consists of a
comprehensive list of all conceivable cost items. In the construction industry, such a list might be prepared
using the Masterformat published by the Construction Specifications Institute (CSI).4 The CSI Masterformat
provides an extensive classification and coding of cost items relevant to the construction industry and is
widely used by manufacturers, architects, contractors, and other professionals.
The standard cost code system should be tailored to the organization’s needs. Some cost items found in the
CSI standard can be deleted if not within the scope of work performed. Other cost categories can be expanded
to provide additional detail in critical areas.
The level of detail resulting from the cost coding system can be adjusted by means of a system of account
hierarchy. The highest category is represented as a major account. Each major account is subdivided into
subaccounts and subsubaccounts. Cost data can be summarized and collected at any level within the account
hierarchy. The CSI contains sixteen major cost accounts. Exhibit 12-2 provides an example of how the
account hierarchy system can be used.
Exhibit 12-1. Transfer of project cost estimate information to the control budget.
Just as the standard cost code is tailored to the general operation of the organization, the project cost control
budget is tailored to satisfy the cost control needs of the specific project. Cost control account categories and
levels of detail are matched to the particular characteristics of the project. Then the cost figures are transferred
from the cost estimate to the appropriate account in the cost control budget.
A well-designed and accurately prepared cost control budget is an essential requirement for a successful
project cost control system. The cost control budget becomes a cost baseline used as a benchmark for
monitoring actual cost and progress during the entire project. The cost control budget is also an important
ingredient for practically all of the project management activities.
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The collection of project cost data falls within the scope of activities normally conducted by the
organization’s accounting system.5 Project costs are collected, classified, and recorded as a routine accounting
function. Individual project costs, when collected at the organizational level and compared with overall
-----------
income, are a basic component in determining profitability of the enterprise.
Although job cost accounting is a fundamental part of most accounting systems, the job cost accounting
format used frequently does not satisfy the requirements of project cost control. Classification and level of
detail used in the accounting system may not match with the cost control budget developed for the project.
For example, we may wish to examine the labor and material costs associated with a certain category of work
tasks such as formwork for cast-in-place concrete. However, the job cost accounting system may provide only
a summary of all concrete costs.
Obviously, the greatest efficiency is obtained when the accounting system can directly provide the
information required by the cost control system. A great deal of progress has been made in this area,
particularly with the use of computerized cost accounting systems. Increased flexibility in the assignment of
cost account codes and the production of specialized reports have significantly improved recent computerized
accounting packages.
However, as a practical matter, some of the detailed cost breakdown data required by the cost control system
may have to be generated separately from the general accounting system. This involves reviewing source
documents such as supplier’s invoices, purchase orders, and labor time sheets at the project level. The cost
data required for cost control purposes can be extracted and recorded in the cost control records.
Exhibit 12-2. Example of cost code hierarchy.
Regardless of how the actual cost data are collected, they must be organized in accord with the project cost
control budget. Comparisons of actual to budget costs can be made only when both categories of costs are
classified, summarized, and presented in identical formats. We do not want to compare apples with oranges.
Earned value is the portion of the budgeted cost that has been earned as a result of the work performed to date.
Cost values originally assigned to the various items in the cost control budget represent total costs. However,
as work on the project progresses, we must periodically compare actual costs with budget costs. In order to
make this comparison, the amount of earned value of the total budget must be determined.
Several methods are available for measuring project progress. Each method has different features and
provides a somewhat different measure of progress. Sound managerial judgment must be applied no matter
which method is used. Progress estimates require honest and realistic assessment of the work accomplished
versus the work remaining.
Some of the more common methods of determining earned value are as follows:
• Units completed. This method involves measuring the number of work units that have been
accomplished and comparing the number of completed units with the total number of units in the
project.6 No subtasks are considered, and partially completed units are generally not credited. For
example, suppose that 420 linear feet (LF) of 4-inch diameter steel pipe has been installed. If the total
project requires 2,100 LF of pipe, then the percentage of completion is 20 percent (420 LF divided by
2, 100 LF).
• Incremental milestones. When the work task involves a sequential series of subtasks, the percentage
of completion may be estimated by assigning a proportionate percentage to each of the subtasks.7 For
example, the installation of a major item of equipment might be broken down as follows:
Construct foundation pad 10 percent
Set equipment on foundation 60 percent
Connect mechanical piping 75 percent
Connect electrical 90 percent
Performance testing and start up 100 percent
Percentage of completion is estimated by determining which of the milestones have been reached. The
accuracy of this procedure depends upon a fair allocation of percentage to the subtask in relation to
costs.
• Cost to complete. When properly applied, this method can provide the most accurate representation
of project cost status.8 The cost to complete the remaining work for a given task is first estimated. This
detailed cost estimate utilizes both the original cost estimate and any historical cost data acquired so far
on the project. The idea is to develop the best possible estimate of the cost required to complete the
task. The percentage of completion is calculated as follows:
For example, if the actual cost to date for structural steel erection is $18,500 and the estimated cost to
complete the task is $6,500, the percentage of completion is calculated as follows:
Percentage of
= 74 percent
Completion
With each of the methods used to estimate the percentage of completion, earned value is calculated as the
percentage of completion times the original budget cost for the task.
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Cost control status reports can be custom-tailored to suit the preferences of individual managers and to
accommodate specific project differences. However, in general, cost status reports should provide an
item-by-item comparison of actual cost to earned value.9 Estimated cost to complete and projected total cost
-----------
can also be shown. Variations from the cost budget can be presented as a percentage or as an actual value, and
categorical breakdowns of the cost status can also be shown. It is often useful to separate material, labor,
equipment, and subcontract costs.
Exhibit 12-3 is an example of a monthly cost control status report. The figures listed as “Total Budget
Amount” represent the originally estimated costs for each of the cost account categories. Actual costs to date
are compared with earned values, and variances are listed. Estimated costs to complete are also given. The
projected total cost has been calculated by adding the actual cost to the estimated cost to complete. This report
could have been expanded to provide a separate listing of material, labor, equipment, and subcontract costs.
The amount of detail can be structured to meet the requirements of the project manager.
Managers will be particularly interested in the variance between actual cost and earned value, and the
resulting total cost projection.
Accuracy and timeliness are equally important in reporting cost control status. If the information is to be of
any value to the project manager, it must be provided soon enough to allow for corrective action. Monthly
cost control reports should be provided as soon as possible after the end of the month. The time lag between
the cutoff of the cost period and production of the report should be as small as possible.
Material suppliers and subcontractors are normally paid monthly; therefore, a monthly cost report seems
appropriate for summarizing these costs. However, labor costs are typically paid on a shorter interval, such as
weekly. Labor costs are also likely to be more variable and consequently are normally the subject of greater
management attention. It may be appropriate to generate weekly status reports of labor costs.
One of the primary functions of the cost control system is to identify problem areas to the manager early
enough so that corrective action can be taken. Although we would not expect actual costs and earned values to
be identical, a significant variance indicates a problem. Determining the source of the problem requires an
investigation by the project manager. There are many possible causes such as an estimating mistake, a change
in material prices, a change in labor wage rates, or a change in work productivity. The cost control system
cannot identify the cause of the problem, but tells the manager where to look for the cause. Additionally, the
cost control system furnishes feedback to the manager, showing the effect of any corrective action.
Establishing an adequate project cost control system requires an investment. Project managers must take the
time before starting project work to develop the structure of the cost control system. They must decide upon
cost classification and the appropriate level of cost detail to be monitored. They need to work out actual cost
collection procedures. How will the cost control system interface with the organization’s accounting system?
Reporting frequencies, procedures, and formats must be determined. Administration of the cost control
system also requires the allocation of staff time. However, if management is willing to commit the necessary
systems, it is possible to have a project cost control system that really works. Operating without effective cost
control is gambling in the dark.
Notes
1. D. Bain, The Productivity Prescription (New York: McGraw-Hill, 1982), p. 62.
2. Construction Industry Institute, Project Control for Construction (Austin, Texas: CII, 1989), p. 6.
3. R. L. Peurifoy and G. D. Oberlender, Estimating Construction Costs (New York: McGraw-Hill,
1989), p. 422.
4. Construction Specifications Institute, Masterformat (Washington, D.C.: CSI, 1989).
5. K. Collier, Fundamentals of Construction Estimating and Cost Accounting With Computer
Applications (Englewood Cliffs, N.J.: Prentice-Hall, 1987), p. 44.
6. Construction Industry Institute, p. 14.
7. Ibid.
8. Fails Management Institute, Financial Management for Constractors (New York: McGraw-Hill,
1981), p. 4.
9. S. E. Powers and B. H. Brown, Walker’s Practical Accounting and Cost Keeping for Contractors
(Chicago: Frank R. Walker, 1982), p. 116.
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Title
Chapter 13
Cost/Schedule Control System Criteria (C/SCSC): An
-----------
Integrated Project Management Approach Using
Earned Value Techniques
Lee R. Lambert
Lee R. Lambert & Associates
The purpose of this chapter is to introduce the concept of cost/schedule control system criteria (C/SCSC),
often referred to as earned value. The use of C/SCSC is obligatory on many U.S. government contracts, yet
the criteria is generally applicable to other contracts as well. The material that follows shows some of the key
characteristics that make the C/SCSC approach one of the most powerful and productive concepts used in
managing complex projects in private, commercial, or government environments.
In the world of C/SCSC, the role of the cost account manager (CAM) is pivotal in the process. The project
manager and all of the other traditional project management contributors are active participants and have
significant responsibilities that can't be underestimated. However, because of the critical role of the CAM, the
material is targeted at helping him or her plan and manage the assigned tasks.
The C/SCSC process is essentially the same at all levels of the project or organization. Individual components
of the C/SCSC address work authorization through reporting. Descriptions of cost accounts, authorized work
packages, and planned work packages have been emphasized because of their significance in the C/SCSC
approach in general and, specifically, because of the ability of the cost account manager to be successful at the
difficult job of balancing the many project management requirements and tasks.
This chapter was adapted from Lee R. Lambert, Cost/Schedule Control System Criteria (C/SCSC): An Integrated Project
Management Approach Using Earned Value Techniques—A Lighthearted Overview and Quick Reference Guide. © 1990 Lee R.
Lambert & Associates.
Process Overview: Introduction to the Concept
History
The first C/SCSC concept was introduced in the 1960s, when Department of Defense Instruction
7000.2-Performance Measurement of Selected Acquisitions exploded on the management scene. The criteria
included in the instruction constitute standards of acceptability for defense contractor management control
systems. The original thirty-five criteria were grouped into five general categories—organization, planning
and budgeting, accounting, analysis, and revisions—and were viewed by many, government and contractor
personnel alike, as a very positive step toward helping to solve management problems while achieving some
much needed consistency in the general methods used throughout the Department of Defense and, eventually,
the Department of Energy and other project worlds.
In the early 1990s, more than 200 contractors, including most of the highly respected organizations in the
world, were working within the boundaries of the criteria, having received validation or certification by the
U.S. government. These organizations represented hundreds of government and private projects and
programs. Hundreds of other contractors have been using the principles of C/SCSC without any requirements
to do so. They have clearly found the concepts and techniques useful on all work, not just that for the U.S.
government.
It should be noted that not everyone agrees that C/SCSC is the best project management approach. However,
investigation reveals these same critics are subtly adapting various components of the C/SCSC concept on
their projects and finding them extremely valuable and productive tools. After all, it is hard to argue with the
sound business management concepts upon which C/SCSC is based.
In this chapter, numerous abbreviations and terms are employed in a description of C/SCSC. A list of these
abbreviations and terms is found in Exhibit 13-1.
Understanding the Critical Data Elements of C/SCSC
There are three critical elements involved in C/SCSC. The budgeted cost of work scheduled (BCWS), the
actual cost of work performed (ACWP), and the budgeted cost of work performed (BCWP).
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*These abbreviations are not common in C/SCSC. Organizations may use their own terminology.
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Title Budgeting
In accord with the scope of work negotiated by the organization with the customer, the budgets for elements
of work are allocated to the cost account manager through the C/SCSC process. These budgets are tied to the
work package plans, which have been approved in the baseline. The following top-down outline, with five
----------- factors, gives the CAM an overview of the C/SCSC budgeting process.
1. Project-to-function budgeting involves budget allocations and budget adjustments.
• Budget allocations involve the following:
• The project manager releases the WBS targets to the WBS managers, who negotiate cost
account targets with the cost account managers. The CAMs then provide work package
time-phased planning.
• When all project effort is time-phased, the C/SCSC information department produces
output reports for the project manager's review. When the performance measurement
baseline (PMB) is established, the project manager signs WBS package printouts, which
are summarized from the cost accounts.
• The WBS manager signs the cost account package printouts, which are summed from
work package planning. The time-phased work package budgets are the basis for
calculating the BCWP each month.
• Regarding budget adjustments, the performance measurement baseline can be changed with the
project manager's approval when either of the following occurs:
• Changes in SOW (additions or deletions) cause adjustments to budgets.
• Formal rebaselining results in a revised total allocation of budget.
2. PMB budgets may not be replanned for changes in schedule (neither acceleration nor slips) or cost
overruns or underruns.
3. Management Reserves (MRs) are budgets set aside to cover unforeseen requirements. The package
change record is used to authorize add/delete transactions to these budgets.
4. Undistributed Budgets (UBs) are budgets set aside to cover identified, but not yet detailed or
assigned SOW. As these scopes of work are incorporated into the detail planning, a PCR is used to
authorize and add to the performance measurement baseline.
5. Regarding detailed planning, the planned work package is a portion of the budget (the BCWP)
within a CA that is identified to the CA but is not yet defined into detailed AWPs.
Cost Accumulation
Cost accumulation provides the CAM with a working knowledge of the accounting methods used in C/SCSC.
There are six things involved in cost accumulation accounting (for actual costs).
1. Timekeeping/cost collection for labor costs uses a labor distribution/accumulation system. The
system shows monthly expenditure data based on labor charges against internal work packages.
2. Three factors are involved in nonlabor costs.
• Material cost collection accounting shows monthly expenditure data based on purchase
order/subcontract expenditure.
• The cost collection system for subcontract/integrated contractor costs uses reports received
from the external source for monthly expenditures.
• Regarding the funds control system (commitments):
• The funds control system records the total value of purchase orders/ subcontracts issued,
but not totally funded.
• The cumulative dollar value of outstanding orders is reduced as procurements are
funded.
3. Regarding the accounting charge number system:
• The accounting system typically uses two address numbers for charges to work packages: (1)
the work package number, which consists of WBS-department-CA-work package; and (2) the
combined account number, which consists of a single character ledger, three-digit major account,
and five-digit subaccount number.
• Work package charge numbers are authorized by the work package manager's release of an
AWP.
4. Regarding account charge number composition, an example of an internal charge number is
181-008-1-01. External charge numbers are alphabetized work package numbers. An example is
186-005-2-AB.
5. Regarding direct costs:
• All internal labor is charged to AWP charge numbers.
• Other direct costs are typically identified as: (1) Purchase services and other; (2) travel and
subsistence; (3) computer, and (4) other allocated costs.
6. Indirect costs are elements defined by the organization.
• Indirect costs are charged to allocation pools and distributed to internal work packages. They
may also be charged as actuals to work packages.
• Controllable labor overhead functions may be budgeted to separate work packages for monthly
analysis of applied costs.
Note that actual cost categories and accounting system address numbers vary by organization. Extra care must
be taken to integrate C/SCSC requirements with other critical management information processes within the
specific organization.
Performance Measurement
Performance measurement for the cost account manager consists of evaluating work package status, with
BCWP calculated at the work package level. Comparison of planned value (BCWS) versus earned value
(BCWP) is made to obtain schedule variance. Comparison of BCWP to actual cost (ACWP) is made to obtain
cost variance. Performance measurement provides a basis for management decisions by the organization and
the customer. Six factors must be considered in performance measurement.
1. Performance measurement provides:
• Work progress status
• Relationship of planned cost and schedule to actual accomplishment
• Valid, timely, auditable data
• The base for estimate at completion, or latest revised estimates
• Summaries developed by the lowest practical WBS and organizational level
2. Regarding cost and schedule performance measurement:
• The elements required to measure project progress and status are: (1) work package
schedule/work accomplished status; (2) the BCWS or planned expenditure; (3) the BCWP or
earned value; and (4) the ACWP or recorded cost.
• The sum of AWP and PWP budget values (BCWS) should equal the cost account budget value.
• Development of budgets provides these capabilities: (1) the capability to plan and control cost;
(2) the capability to identify incurred costs for actual accomplishments and work in progress; and
(3) the cost account/work package BCWP measurement levels.
3. Performance measurement recognizes the importance of project budgets.
• Measurable work and related event status form the basis for determining progress status for
BCWP calculations.
• BCWP measurements at summary WBS levels result from accumulating BCWP upward
through the cost account from work package levels.
• Within each cost account, the inclusion of LOE is kept to a minimum to prevent
distortion of the total BCWP.
• There are three calculation methods used for measuring work package performance: (1)
Short work packages are less than three months long. Their earned value (BCWP) equals
BCWS up to an 80 percent limit of the budget at completion until the work package is
completed. (2) Long work packages exceed three months and use objective indicator
milestones. The earned value (BCWP) equals BCWS up to the month-end prior to the first
incompleted objective indicator. (3) Level of effort: Budget (BCWP) is earned through
passage of time.
• The measurement method to be used is identified by the type of work package. Note that
BCWP must always be earned the same way the BCWS was planned. (See Exhibit 13-3
for alternate methods of establishing BCWS and calculating BCWP.)
4. To develop and prepare a forecast to complete (FTC), the cost account manager must consider and
analyze:
• Cumulative actuals/commitments
• The remaining CA budget
• Labor sheets and grade/levels
• schedule status
• Previous quarterly FTC
• BCWP to date
• Cost improvements
• Historical data
• Future actions
• Approved changes
5. The CAM reports the FTC to the C/SCSC information processing department each quarter.
6. The information processing department makes the computer entry and summarization of the
information to the reporting level appropriate for the project manager's review.
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0/100 Take all credit for performing work when the work package is
complete.
50/50 Take credit for performing one-half of the work at the start of
the work package; take credit for performing the remaining
one-half when the work package is complete.
Discrete Value Milestones Divide work into separate, measurable activities and take credit
for performing each activity during the time period it is
completed.
Equivalent Units If there are numerous similar items to complete, assume each is
worth an equivalent portion of the total work package value;
take credit for performance according to the number of items
completed during the period.
Percentage Complete Associate estimated percentages of work package to be
completed with specific time periods; take credit for
performance if physical inspection indicates percentages have
been achieved.
Modified Milestone-Percentage Complete Combines the discrete value milestone and percent complete
techniques by allowing some “subjective estimate” of work
accomplishment and credit for the associated earned value
during reporting periods where no discrete milestone is
scheduled to be completed. The subjective earning of value for
nonmilestone work is usually limited to one reporting period or
up to 80 percent of the value of the next scheduled discrete
milestone. No additional value can be earned until the scheduled
discrete milestone is completed.
Level of Effort Based on a planned amount of support effort, assign value per
period; take credit for performance based on passage of time.
Apportioned Effort Milestones are developed as a percentage of a controlling
discrete work package; take credit for performance upon
completion of a related discrete milestone.
• Variances are identified to the CA level during this stage of the review.
• Both cost variance and schedule variance are developed for the current period and cumulative
as well as at-completion status.
• Determination is made whether a variance is cost-oriented, schedule-oriented, or both.
• Variance analysis reports are developed on significant CA variances.
2. Presentation
• Variance analyses should be prepared when one or more of the following exceed the thresholds
established by the project manager: (1) schedule variance (BCWP to BCWS); (2) cost variance
(BCWP to ACWP); or (3) at-completion variance (budget at completion to latest revised
estimate, or LRE).
3. Operation
• Internal analysis reports document variances that exceed thresholds: schedule problem analysis
reports for “time-based” linear schedule, or cost account variance analysis reports for dollar
variances.
• Explanations are submitted to the customer when contractual thresholds are exceeded.
• Emphasis should be placed upon corrective action for resolution of variant conditions.
• Corrective action should be assigned to specific individuals (cost account managers) and
tracked for effectiveness and completion.
• Internal project variance analyses and corrective action should be formally reviewed in
monthly management meetings.
• Informal reviews of cost and schedule variance analysis data may occur daily, weekly,
or monthly, depending on the nature and severity of the variance.
Exhibit 13-4 presents some sample comparisons of BCWS, BCWP, and ACWP.
The Appendix of this chapter contains additional graphic examples that show how the relationships between
BCWS, BCWP, and ACWP are interpreted and applied to tracking project progress.
Reporting
There are two basic report categories: customer and in-house. Customer performance reports are contractually
established with fixed content and timing. In-house reports support internal projects with the data that relate to
lower organizational and WBS levels. The CAM is mainly concerned with these lower-level reports.
1. Customer reporting
• A customer requires summary-level reporting, typically on a monthly basis.
• The customer examines the detailed data for areas that may indicate a significant variance.
Exhibit 13-4. Comparisons of BCWS, BCWP, and ACWP.
• The cost performance report (CPR) is the vehicle used to accumulate and report cost and schedule
performance data.
2. In-house reporting
• Internal management practices emphasize assignment of responsibility for internal reports to
an individual CAM.
• Reporting formats reflect past and current performance and the forecast level of future
performance.
• Performance review meetings are held: (1) monthly for cost and schedule; and (2) as needed
for review of problem areas.
• The CAM emphasizes cumulative to-date and to-go cost, schedule, and equivalent manpower
on the CA work packages.
• It is primarily at the work package level that review of performance (BCWP), actuals (ACWP),
and budget (BCWS) is coupled with objective judgment to determine the FTC.
• The CAM is responsible for the accuracy and completeness of the estimates.
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Title
Chapter 14
Value Engineering and Project Management:
-----------
Achieving Cost Optimization
Alfred I. Paley
NRI Associates
Value analysis/value engineering (VA/VE) provides project managers with a powerful tool for maintaining
quality standards while eliminating unnecessary costs and giving visibility for cost reduction efforts in the
event of cost growth. In essence, it provides a “how to” answer to the question, “What can be done to reduce
costs, yet maintain technical performance?”
Management of costs is one of the three major tasks of project management, and in fact it is the bottom line in
the measurement of project success. In addition to completing the project with technical excellence, and on
time, the project must be completed within budget to be fully successful. Project management requires that
the following activities and actions take place: the project must be planned; the resources must be obtained
and organized; progress must be monitored; and control must be exercised so that program goals and
objectives are met. The plan must allow for the establishment of the organization and development of the
structure to communicate and manage staffing and material and provide the visibility to understand what is
happening in each phase of the project. Monitoring the status of the plan is necessary so that control can be
effected. However, in the event that monitoring has indicated a problem, monitoring alone does not suggest
solutions.
Cost growth is one of the most difficult items to correct in a project management task. Tools for cost
management are often not sufficiently detailed, and cost management is left to the simple statement that a
“good cost control system” should be used. Most modern cost control systems are based on the work
breakdown structure (WBS), which is used as a basis for developing the budget. Feedback of charges against
the WBS is designed to detail the project status with regard to “actuals.” The actuals are a record of what has
taken place, the historical and precisely accurate accounting of charges to the project. The actuals are
compared with the previously established budgets, and in that way, deviations are detected so that corrections
can be made. This methodology also provides the measurement tool for design-to-cost programs. However, it
is one thing to detect cost growth, and another to know what to do after the growth has occurred. Correction
of cost overruns on individual WBS items often leads to reducing the quality of the overall project in an
attempt to achieve cost goals. In addition, problems may be encountered because of the fact that budgeting
skills are not easily learned. Many project management systems provide the ability to learn from past
experience by capturing actuals from previous projects for comparison purposes. The cost history from
previous projects is then used to develop estimates for the present project, with consideration for complexity,
learning curves, personnel changes, and experience factors.
The difficulty encountered in managing costs is apparent from the number of projects that experience cost
overruns. As a project management adage states: “No project has ever been done within cost, and yours will
not be the first!” The methodology of value analysis/value engineering is most useful in the cost control
aspect of project management, since it addresses itself to maintaining quality while eliminating unnecessary
costs, which are present in all designs, products, processes, and procedures. VA/VE used up-front in the
concept stage avoids unnecessary costs from the beginning. The application of function-oriented VA/VE
methodology provides insight into relationships of functions so that cost drivers, customer needs, and
identification of unnecessary costs are provided and intelligent management decision making can occur.
Function-oriented VA/VE is used in the product planning, design, and support phases.
Historical Beginnings
Value analysis began in the United States after World War II as a result of experiences by members of the
War Production Board on their major project management task: winning the war. After the successful
conclusion of the war, the members of the War Production Board returned to their previous positions in
industry. During debriefing, members who returned to the General Electric Company reported the following
observation: Quite often, in order to maintain the flow of materials and parts needed in the war effort,
substitutions had to be made for items in short supply or delayed; more often than not, the substitutions
worked just as well, but cost less. The reasons were not understood by the observers or the investigators.
At General Electric, a study was undertaken to understand the phenomenon and perhaps to be able to obtain
the benefits of reduced costs on purpose, instead of by accident. The study resulted in the realization that what
had been required in the instance of the specification of the part or material was the “function” of the part or
material, and not necessarily the specific part or material ordered. The study found that if in a design or other
requirement, function was determined initially, and a search was made for alternative ways to accomplish the
function, then less expensive items could be selected to accomplish the function. Lawrence D. Miles, a GE
engineer assigned to the purchasing department for the study, published the results in Techniques of Value
Engineering Analysis (McGraw-Hill, 1956). In the book, he also developed the concept of orders of functions
(basic and supporting secondary) and of how to identify unnecessary functions. From this original effort, the
discipline of VA/VE developed and has proved to be a significant methodology for eliminating unnecessary
costs in existing products, processes, and procedures and during design and planning phases of all forms of
efforts, while maintaining the specified function.
The function-oriented discipline of VA/VE was coupled with structured problem solving to develop the
methodology that is now called by various names, including analysis, value engineering, value management,
value control, and value assurance. For most individuals in the field, the terms are synonymous. In this
chapter, the acronym VA/VE is used.
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After the FAST diagram is generated, the next step is to assign costs to each function to establish a
cost-function relationship. This step is important, as it reveals the problem and where it really exists. The
costs associated with the IUS must be divided and allocated to the functions. Since the basic function is the
most important, the majority of costs would be assumed to be allocated there. What is invariably seen is that a
disproportionate division of costs exists, with little regard given to the importance in the critical path of
functions. The FAST diagram may show that the major cost factors are not even on the critical path of
functions. The problem then becomes one of finding less costly ways to accomplish the secondary functions
without sacrificing performance or quality.
The FAST diagram does not provide the solution, but it defines the problems and shows the cost imbalances
so that analysts can search for alternative solutions, which can reduce the costs of secondary functions or
eliminate unnecessary functions and the costs associated with them.
Structured problem solving requires the use of a procedure that defines the order to be followed in the search
for the solution to the problem. One such problem-solving procedure is diagrammed in Exhibit 14-2. The first
step is the examination of the unsatisfactory situations. From the examination, the problems are defined (Step
2). Once the problems are defined, the use of creative thinking processes, such as brainstorming, are
employed in Step 3 to develop a choice of possible solutions. The fourth step is the evaluation to select the
best solution for the defined problems. And finally, in Step 5, action to implement the selected solution is
presented to the decision makers. The most difficult and most important step in the procedure is the problem
definition, since if the problem is not properly identified and defined, successful solutions will not be found,
and the real problem will never be solved. Solutions for symptoms or unsatisfactory situations are generally
not solutions to problems. A key element in problem solving is to complete each step in the outlined
procedure before the next step is begun.
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The VA/VE workshop follows a prescribed job plan that provides a disciplined procedure to achieve the
answers to the five questions. The phases of the job plan are:
Phase 1: Information Phase. This involves several procedures.
• Define the scope of the task or problem to be analyzed. This answers, “What is it?”
• Define function or functions by developing the FAST diagram. This answers, “What does it
do?”
• Provide cost visibility and develop cost-function relationships using the FAST diagram. This
answers, “What does it cost?”
• Reexamine scope. At this point, based on the cost-function relationships and the identification
of cost drivers and basic and secondary functions, the team may through creative discontent want
to reconsider the scope of the analysis to study a particular function in more depth.
Phase 2: Speculative Phase. In this phase, creative brainstorming takes place in search of alternative
ways to achieve, alter, or eliminate unnecessary functions. This answers, “What else can do the job?”
Phase 3: Evaluation Phase. The new ideas are considered and sorted, and costs are determined for
comparison and selection of the best alternatives. This answers, “What does that cost?”
Phase 4: Planning Phase. Here, the team determines the approach for implementing the new ideas.
Phase 5: Execution Phase. Follow the plan of Phase 4.
Phase 6: Report Phase. The team documents and presents the results of the workshop to the decision
makers showing the concept, detailed solutions, and cost benefits.
A VA/VE workshop generally requires forty hours to conduct. During that period, a trained leader (a certified
value specialist—CVS—certified by the Society of American Value Engineers, is recommended) leads teams
of five or six individuals working on related pieces of the system being studied. Training of the teams in the
techniques of value analysis is done concurrently as part of the workshop.
Fundamental to achieving the results of improved value (reduced cost for the same quality requirements) are:
• Following the job plan rigorously
• Training the teams in the VA/VE techniques
• Generating team enthusiasm and motivation for creativity enhancement
Exhibit 14-4 outlines the job plan and its timing during a five-day VA/VE workshop.
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Title
Section VI
Teamwork and Team Building
----------- Chapter 15
Models for Achieving Project Success Through Team
Building and Stakeholder Management
John Tuman, Jr.
Management Technologies Group, Inc.
This chapter presents innovative techniques for building successful project teams. Specifically, the chapter
defines project success; identifies who determines project success; describes techniques for measuring project
success; and explains how to develop a model for creating a winning team. The goal of the chapter is to help
project managers build teams with a success culture—that is, teams that have success ingrained in their
values, beliefs, processes, procedures, and management style.
Project Champions
Project champions are those who have some reason to bring a project into being. These stakeholders include
the developers, investors, and entrepreneurs motivated by profit. The group also includes the visionaries who
are trying to create something for the future or for the benefit of others. Also included is the client or customer
with a specific need. Project champions can also include politicians, community leaders, and others who want
to satisfy the needs of their constituents. The role of the project champion is significant; in most cases the
project cannot exist without them. Furthermore, the judgments, evaluations, and perceptions of these
stakeholders probably have the greatest effect in confirming project success. The project champions must be
fully satisfied, or the project is not a success. Obviously, the composition of the project champions as well as
their needs and perceptions can vary widely. In some cases, the individual goals and objectives of those
within this group are in conflict with each other.
Project Participants
This group of stakeholders includes organizations and individuals who are responsible for planning and
executing the project. Typically, this includes the project manager and project team, engineers, constructors,
vendors, suppliers, craftspeople, and regulatory agencies at the local, state, and national levels. The
involvement of the project participants is again fairly obvious. Success from their viewpoint means
accomplishing the project goals and receiving appropriate recognition.
Community Participants
These stakeholders include groups or individuals who are directly affected by the project. Community
participants create the environment that surrounds the project. The group can materialize because of
environmental, social, political, economic, health, or safety concerns. These stakeholders can be a few
households concerned about increased traffic from a new facility or a religious group opposed to a new
technology. They can have a profound impact on a project. For example, antinuclear groups have stopped the
construction of nuclear power plants, environmentalists have halted highway construction programs, and
religious groups have challenged genetic research projects.
Parasitic Participants
This group of stakeholders presents an interesting and important challenge to project managers. Parasitic
participants consist of organizations and individuals who do not have a direct stake in the project. In this
group we find the opportunists, the activists, and others who are looking for a focal point for their energies,
internal drives, and desires to promote their personal philosophies and views. By definition, this group is
distinct and different from those whose members have legitimate concerns about the impact of a project on
their community or way of life. The distinction is that the primary motivation of the parasitic participant is
one of self-aggrandizement. The project provides the parasitic participants with an opportunity for activity,
visibility, and self-fulfillment and a platform to promote their philosophy or ideas.
This group also covers the information media: radio, TV, newspapers, magazines, etc. The information media
use the interest, attention, concerns, or controversy that can surround a project as a vehicle to sell their
products. If projects can be made to appear controversial, sensational, dangerous, exciting, or risky, they
become more newsworthy. Usually, the information media have no direct stake in the project, yet their
influence on the project can be devastating.
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Defining the project success goals sets the baseline for measuring project success. The success goals must
include the stakeholders’ needs and desires as well as the cost, schedule, and technical objectives of the
project. We can get information about the stakeholders by talking to them and opening lines of
communication—i.e., advertising, surveys, public meetings, information hot lines, etc. Also, the relationships
among stakeholder goals must be established. Are there conflicting goals? Are any of the goals mutually
supportive? Do these goals have a positive or negative impact on the project?
Exhibit 15-2. Project management model.
A stakeholder study is called for in the conceptual phase. For a straightforward project, the stakeholders’
goals may be simple and easy to understand. They may even be compatible with the project team’s goals.
However, for a complex or controversial project, there is usually a bewildering array of stakeholders’
concerns and interests. The project team must sort out the different concerns and interests and determine
which stakeholders have the leverage to hinder project success.
Exhibit 15-3 presents a technique for identifying and ranking project stakeholders. This technique produces
numerical values to establish the power of the stakeholders and the degree of difficulty of their goal. In
evaluating project stakeholders’ success goals, we look at the characteristics of the goals (difficulty, conflict
with other goals, etc.) and the power that each stakeholder has (to impact project resources, success, and so
on). Then, a simple 1 to 5 scale is used to rate each factor. Each rating is multiplied by that factor’s weight to
obtain the weighted scale. The scales and weights used should reflect management’s requirements. For
example, a finer scale would be used for a project that has many factors to consider.
The final weighted scores are then used to develop a stakeholder success grid, as shown in Exhibit 15-4. The
success grid shows the relationship between the difficulty of the stakeholders’ goals and their power to
influence project success. The informa-tion from the success grid is ranked by quadrant. In the example
shown in Exhibit 15-4, stakeholders not directly involved in the project—activist groups, the media, and
community leaders—have a major impact on project success.
Exhibit 15-3. Technique for identifying and ranking success goals of stakeholders.
From these analyses, the project team members can develop plans and processes to focus their energy and
resources where they will do the most good.
Management processes are required to accomplish project work effectively and efficiently. Project work
involves planning, organizing, and directing resources and people to address stakeholder issues and project
cost, schedule, and technical objectives. Often, stakeholders focus on the qualitative aspects of the project.
Their concerns include health, safety, reliability, quality, and environmental issues. Nevertheless, the team
must implement a process to manage all the project’s requirements and activities in a systematic manner. For
simplicity, we can break down the project’s responsibilities into two types of activities: hard and soft.
Hard activities relate to the business of planning and controlling work scope, task, resources, practices, and
standards. Hard activities also encompass the basic management functions of communicating, information
processing, and decision making. Soft activities relate to behavioral modifications and opinion shaping. These
include training, team building, community relations, advertising, and promotion. Later in this chapter we will
discuss ways of dealing with soft project activities.
Successful project teams develop a culture and a management style that fits the project environment. These
teams understand the political, legal, social, and economic situation as well as the infrastructure and physical
conditions. Project teams must analyze their project environment as a military leader evaluates the terrain
before a battle. The team must thoroughly evaluate the demands of its project environment and ask the
question, “What must we do and how must we act to be successful under these conditions or in these
situations?”
Project success mapping, as shown in Exhibit 15-5, first looks at the five components that are vital to project
success: (1) the resources available; (2) the difficulty of the project itself; (3) the demands and perceptions of
the stakeholders; (4) the conditions and problems presented by the project environment; and (5) the level of
management and sponsor commitment. The second step is to determine the project team’s ability to (1)
control, (2) influence, and (3) react/respond to all of the requirements and problems presented by the five
main components for project success.
The project team controls, influences, or reacts/responds to needs and situations by engaging in both hard and
soft activities. In hard activities, the team controls, influences, or reacts/responds to project requirements by
managing resources, applying practices or standards, or doing more or less work (scope of work). The team
can also control, influence, or react/respond to project requirements through soft activities. That is, the team
can seek to shape opinions and attitudes and modify behaviors through training, team building, advertising,
promotion, and community relations.
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Title Project success mapping thus provides a simple way for the project team to identify the activities, demands,
and conditions that they must manage. From this analysis the team can determine the kinds of people they
want on the team.
Success scenarios provide a way for project teams to develop ideas about their culture and philosophy of
operation. However, the team must formalize its thinking and define a specific management style and way of
doing business. The team should develop a modus operandi that describes its philosophy, values, vision, and
mission. This document is broader in scope than the typical project management manual. The modus operandi
is the charter that guides the development of the project team and its policies, procedures, and systems
throughout the life of the project.
In summary, the success model is designed to reduce the real-life cost of on-the-job learning. By forcing the
team to examine the project environment and the stakeholders’ demands, we hope to avoid many project
pitfalls. However, a success model is a dynamic instrument, and it should be refined as the project evolves.
Thus, the project team can build a knowledge base of ideas, plans, decisions, and results and continually
improve the model for future undertakings.
Formal team building must start early in the project. Team leaders should meet to discuss the project and
conceptualize the winning team. Studies and analysis from the success model help define the attributes of the
winning team. The goal is to design a team that is well suited to the demands of the project environment.
These demands are defined by: (1) the stakeholders’ success criteria, (2) project environmental factors, (3)
potential risks and unknowns, (4) resource constraints, (5) management support and commitment, and (6) the
difficulty of the project itself. Information about each of these areas can be developed using the project
success mapping technique referred to in Exhibit 15-5.
The output of Step 1 is a specification that defines the structure and character of the project team. Initially,
this specification is used to identify potential team members. Later, the specification helps guide the actual
formation and development of the team.
Project participants must be informed of the team development process and their role in this process.
Prospective team members must understand that they are the ones who establish the team, conduct the team
building, and manage the project.
Successful team building is an integrated process that continues throughout the life of the project. The
intensity of the team building is high during the early stages; however, it must persist through all phases of the
project. Every success or failure is an opportunity to strengthen the team. The team-building phases include:
(1) project simulation, (2) project conditioning, and (3) team maturing.
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The Success Analysis Matrix shown in Exhibit 15-8 presents a technique for evaluating stakeholders’ goals
and devising project strategy. The matrix: (1) identifies the project stakeholders, (2) defines their goals, (3)
establishes the levels of importance of the goals (by their impact on project success), (4) estimates the team’s
ability to achieve the goals, and (5) quantifies the cost of achieving these goals.
The Success Analysis Matrix makes a pragmatic evaluation of the stakeholders and the costs required to fulfill
their goals. A careful analysis of the nature and cost of the stakeholders’ goals may reveal some interesting
facts. In some situations, no amount of effort, time, or money can satisfy a particular stakeholder’s criteria for
success. However, if the stakeholder’s power is limited, it may not matter. On the other hand, it is possible
that only some small effort may satisfy a particularly powerful stakeholder. Foresight, planning, and a
willingness to understand the stakeholder’s needs and concerns can make the difference. The Success
Analysis Matrix provides insight into stakeholder demands.
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Many of the elements identified in the Success Analysis Matrix are easy to quantify and measure. Thus,
expenditures and progress can be evaluated against the plan. However, qualitative or subjective success goals
present more of a problem. Subjective goals are described as good, bad, high, low, effective, ineffective,
----------- valuable, and desirable. Fortunately, everyday language is sufficient to define most qualitative goals. The
more difficult problem is to measure the progress made in accomplishing these goals. One approach is to have
the stakeholders actually provide goal definitions and progress measurements.
To control a project, the team must collect data on how work is progressing. Data collection and analysis is
straightforward for conventional cost, schedule, and technical objectives. However, for subjective goals the
problem requires a different approach. Data are collected on these items by: (1) having a third party query the
stakeholder, (2) establishing stakeholder feedback procedures, (3) using survey and sampling techniques, and
(4) observing stakeholders’ reactions to project conditions
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Title
Chapter 16
A Conceptual Team-Building Model: Achieving
-----------
Teamwork Through Improved Communications and
Interpersonal Skills
Paul C. Dinsmore
Dinsmore Associates
Teamwork means people cooperating to meet common goals. That includes all types of people doing work
that calls for joint effort and exchange of information, ideas, and opinions. In teamwork, productivity is
increased through synergy: the magic that appears when team members generate new ways for getting things
done and that special spirit for making them happen.
Teamwork offers a number of concrete benefits.
• Teamwork enhances success. Teamwork helps your group excel at what it’s doing and boosts its
chances of “winning.”
• Teamwork promotes creativity. The team approach stimulates innovation and encourages people to
try new approaches to problems.
• Teamwork builds synergy. The mathematical absurdity “2 + 2 = 5” becomes possible.
• Teamwork promotes trade-offs and solves problems. Teamwork creates a problem-solving
atmosphere that facilitates decisions about schedule, cost, and performance.
• Teamwork is fun. Working together for a common cause creates group spirit, lightens up the
atmosphere, and reduces tensions and conflicts.
• Teamwork helps large organizations as well as small groups. The team concept can
This chapter was adapted from Paul C. Dinsmore, “Team-Building” module, Trainers’ Workshop (January-February 1991).
• Teamwork helps large organizations as well as small groups. The team concept can be used to
involve an entire company culture as well as to stimulate a small department.
• Teamwork responds to the challenge of change. Teams thrive on opportunities to improve
performance and show how they can adapt and adjust in order to win.
There are also pitfalls to watch out for.
• There can be negative synergy. When the team doesn’t get its act together, then synergy becomes
negative and the equation becomes “2 + 2 = 3.”
• There can be excessive independence. Ill-guided or poorly built teams wander off course and start
doing their own thing as opposed to meeting overall goals.
• Time is needed to build and maintain the team. If company culture is not team-oriented, a lot of time
and effort is needed to create the team spirit.
• Decision making is slow. Getting a group to make a decision on a consensus basis is a
time-consuming task.
Why is teamwork more important now than it has been in the past? One reason is that change—economic,
societal, cultural, environmental, technological, political, and international—is taking place at an accelerating
rate. And change is having a dramatic impact not only on individuals but also on organizations. Task forces,
departmental teams, cross-functional teams, and project teams are replacing the cumbersome hierarchical
organizational structure of the past in many organizations. Teamwork enables organizations to be nimbler,
more flexible, and better able to respond swiftly and creatively to the challenge of today’s competitive
business environment.
Several factors have speeded this trend toward team approaches to business planning and operations:
• The success of the Japanese management style, which stresses employee involvement in all phases of
the work
• The rejection by newer generations of autocratic leadership
• Rapid changes in technology that create a need for quick group responses
• Emphasis on corporate quality, which requires team effort on an organizational scale
Team building encompasses the actions necessary to create the spirit of teamwork. Research by Tuckman and
Jensen1 indicates that the team-building process is a natural sequence that can be divided into five stages:
1. Forming
2. Storming
3. Norming
4. Performing
5. Adjourning
A detailed description of the team-building process follows.
In this stage, the manager and the group focus more on tasks than on teamwork. They organize the team’s
structure, set goals, clarify values, and develop an overall vision of the team’s purpose. The manager’s role is
to direct these efforts and to encourage group members to reach consensus and achieve a feeling of
commitment.
Stage 2: Storming
This stage is less structured than the first stage. The manager broadens the focus to include both
accomplishing tasks and building relationships. As the social need for belonging becomes important to group
members, the emphasis is on interpersonal interactions: active listening, assertiveness, conflict management,
flexibility, creativity, and kaleidoscopic thinking. The group completes tasks with a sense of understanding,
clarification, and belonging. The manager relies not only on actual authority but also on leadership skills such
as encouragement and recognition.
Stage 3: Norming
In this stage, the team-building process is more relationship-based than task-oriented. Since recognition and
esteem are important for group members, the manager relies on communication, feedback, affirmation,
playfulness, humor, entrepreneurship, and networking to motivate the team. Group members achieve a feeling
of involvement and support.
Stage 4: Performing
At this point, the team is operating very much on its own. Management style is neither task- nor
relationship-oriented, since the team members are motivated by achievement and self-actualization. The
manager’s role in this phase is to serve as mentor/coach and to take a long-range view of future needs. Team
members focus on decision making and problem solving, relying on information and expertise to achieve their
goals.
Stage 5: Adjourning
Management concern in this wrap-up stage is low-task and high-relationship. The manager focuses on
evaluation, reviewing, and closure. Team members continue to be motivated by a feeling of achievement and
self-actualization.
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The key to successful team planning is involvement: Get people involved at the outset of your team-building
effort to win their personal commitment to your plan. One simple technique for involvement includes a
questionnaire in which team members are asked to assess the need for team building. A sample questionnaire
is shown in Exhibit 16-2. In the test, team members rate the degree to which certain team-related problems
appear. If the team is newly formed, the questionnaire should be answered from the perspective of anticipated
problems. Then test results are tabulated and group discussion follows in search of a consensus on how to
obtain team development. This consensus approach generates synergy when the team carries out the planned
activities. In addition, potential differences are dealt with in the planning stage before resources are fully
committed.
Exhibht 16-1. Team-building rules and the five phases of team building.
Group planning approaches are used in programs such as quality circles, total quality management, and
participative management, as well as project management. The management skills required to make these
group planning efforts effective include interpersonal communications, meeting management, listening,
negotiation, situational management, and managerial psychology.
The right planning process produces a quality plan to which the parties involved are committed. Some
methods that enhance the planning process are discussed below.
• Creativity sessions. Techniques for boosting creativity include brainstorming, brainwriting, random
working, checklists, and word associations.
• Consensus planning. A plan reached through group discussion tends to yield a program that is well
thought through, with a high probability of being implemented.
• Decision-making models. Formal models for making decisions can be used as a basis for planning.
Some common techniques are decision trees, problem analysis, decision analysis, implementation
studies, and risk analysis.
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Instructions: Indicate the degree to which the problems below exist in your work unit.
Test Results: Add up your scores. If the score is over 60, then your work unit is in good shape with respect to teamwork. If you
scored between 46 and 60 points, there is some concern, but only for those items with lower scores. A score of 30 to 45
indicates that the subject needs attention and that a team-building program should be under way. A score of between 15 and 30
points means that improving teamwork should be the absolute top priority for your group.
You should build a team like you were putting together a puzzle. It involves:
• Individuals (like the separate puzzle pieces)
• One-on-one contacts (like pairing up matching pieces)
• Small groups (like the subsets of the puzzle)
• Large groups (like the overall picture that the whole puzzle represents)
This means that in team building, just as in putting together a puzzle, you need to view the whole range of
team factors, from the characteristics and talents of the individual team members to the overall picture: the
team’s immediate goals and longterm objectives and how the team fits into the larger organizational scene.
Some of the concrete steps that transform groups into teams are discussed below.
Here the focus is individual. As team leaders concern themselves with developing their own skills and
knowledge bases, then the other pieces of the puzzle begin to gravitate and fall into place. All team leaders
communicate their management philosophies to some extent by setting both overt and subliminal examples.
The manager who trusts subordinates and delegates authority to key project members can expect others to
emulate that style. Likewise, an open give-and-take approach fosters similar behavior in the team and in
others associated with the project under way. Through the team leader’s own actions, team members’ best
behavior is called to the forefront.
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Training may involve small groups or the overall group or may incorporate all the stakeholders involved in
the team’s efforts. Informal training sessions can be conducted in various forms, such as lectures, roundtable
discussions, and seminars.
• Lectures are a one-dimensional form of training. They put large amounts of information into short
time frames. Lectures given by experts can bring top-quality information to the team members. When
the speaker is well known, the lecture stimulates special interest.
• Roundtable discussions are open-forum debates on pertinent subjects. They give participants a
chance to air their views and present their opinions and ideas frankly. The goal may be to establish a
consensus or to provide a basis for planning in-depth training programs.
• Seminars or workshops combine the informational content of the lecture with opportunities for
participation offered by the roundtable. In seminars or workshops, information is dispensed in smaller
doses, interspersed with group discussions and debates. Seminars are established around a longer time
frame than lectures or roundtable discussions. Two- to three-day seminars are the most popular, but
one-day events are acceptable, and five-day seminars are right for more in-depth coverage.
Of the approaches aimed at heightening team synergy, a formal team-building program is apt to bring the best
results because:
• The longer program duration provides greater opportunity for retention of concepts as they are
reworked throughout the program.
• On-the-job application of the concepts provides timely feedback while the course goes on.
• In-depth treatment can be given to subjects.
• Enough time is available to build a consensus among participants.
Listening
Communication, no matter how clear and concise, is wasted unless someone is listening actively to the
communicator’s message. When team members know how to listen actively, overall effectiveness is boosted.
Here is the attitude that represents good listening:
I am interested in what you are saying and I want to understand, although I may not agree with
everything you say. You are important as a person, and I respect you and what you have to say. I’m
sure your message is worth listening to, so I am giving you my full attention.
Other listening pointers include:
• Maintaining eye contact
• Not interrupting
• Keeping a relaxed posture
Good listening also requires the listener to focus on both the communicator’s content and feelings and then to
extract the essential message being conveyed.
Interpersonal conflict can occur whenever two or more people get together. It’s an inevitable part of team
dynamics. There are five basic techniques for dealing with interpersonal conflict.
1. Withdrawing (pulling out, retreating, or giving up)
2. Smoothing (appeasing just to keep the peace)
3. Bargaining (negotiating to reach agreement over conflicting interests)
4. Collaborating (objective problem solving based on trust)
5. Forcing (using power to resolve the conflict)
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Title Application of these techniques depends on the situation. Effective team members recognize that conflict is
inevitable and rationally apply appropriate conflict resolution modes in each given situation. Here are some of
the applications:
1. Use withdrawing when you can’t win, when the stakes are low, to gain time, to preserve neutrality
or reputation, or when you win by delay.
-----------
2. Use smoothing to reach an overarching goal, to create an obligation for a tradeoff at a later date, to
maintain harmony, to create good will, or when any solution will do.
3. Use bargaining (also called conflict negotiation) when both parties need to be winners, when others
are as strong as you, to maintain your relationship with your opponent, when you are not sure you are
right, or when you get nothing if you don’t make a deal.
4. Use collaborating when you both get at least what you want and maybe more, to create a common
power base, when knowledge or skills are complementary, when there is enough time, or where there is
trust.
5. Use forcing when a “do or die” situation exists, when important principles are at stake, when you are
stronger (never start a battle you can’t win), to gain status or demonstrate power, or when the
relationship is unimportant.
Negotiating
Team members are likely to find themselves dealing with both third-party and in-house situations that call for
major negotiation skills. The type of negotiation that tends to be effective in team settings is called principled
negotiation. This is negotiation in which it is assumed that the players are problem solvers and that the
objective is to reach a wise outcome efficiently and amicably.
Principled negotiation also assumes that the people will be separated from the problem, that premature
position taking will be avoided, that alternative solutions will be explored, and that the rules of the negotiation
will be objective and fair. This means focusing on interests rather than on positions and implies fully
exploring mutual and divergent interests before trying to converge on some bottom line. The tenet invent
options for mutual gain—calling for a creative search for alternatives—is also fundamental to principled
negotiation.
Influencing
In team situations, individual authority lags well behind the authority of the group. Therefore, effective teams
depend on the ability of members to influence one another for the good of the common cause. Influence
management includes the following principles:
• Play up the benefit. Identify the benefit of your proposal for the other party (items such as more
challenge, prestige, or visibility, or the chance for promotion or transfer). Then emphasize that benefit
in conversations so that the message is communicated.
• Steer clear of Machiavelli. Avoid manipulation. Concentrate on influencing with sincerity and
integrity.
• Go beyond “I think I can.” Successful influence managers don’t waste time questioning whether
things can be done. Their efforts are aimed at how the task will be performed and what needs to be
done to make it happen.
• Put an umbrella over your moves. Effective influencing hinges on strategic planning, to give
direction and consistency to all influencing efforts.
• Tune in to what others say. Successful influence managers learn to identify others’ expectations and
perceive how given actions contribute toward fulfilling those expectations.
• Size up your plans for congruency. Make sure there is a fit between proposed actions, testing your
plans for consistency, coherence, and conformity.
• Remember: “Different strokes for different folks.” Be sure to adapt your approach to fit each person’s
individual characteristics. Size up your targets and adjust your presentation to individual needs.
• Watch your language! Be careful with what you say and how you say it. Screen out pessimism and
other forms of negativity, putting positive conviction into what you say to increase the impact of your
message.
When team members are schooled in these basics, teamwork is likely to come about rapidly. Synergy is
generated as people work together to meet common goals.
Note
1. B. W. Tuckman and M. A. Jensen, “Study of Small Group Development Revisited,” Group and
Organizational Studies (1977).
References
Blake, Robert R., Jane S. Mouton, and Robert L. Allen. Spectacular Teamwork. New York: John Wiley
& Sons, 1987.
Bucholz, Steve, and Thomas Roth. Creating the High Performance Team. New York: John Wiley &
Sons, 1987.
Dinsmore, Paul C. Human Factors in Project Management, Revised Edition. New York: AMACOM,
1990.
Dyer, William G. Team Building: Issues and Alternatives. Reading, Mass.: Addison-Wesley, 1987.
Hastings, Colin, Peter Bixby, and Rani Chaudhry-Lawton. The Superteam Solution. London, England:
Gower, 1986.
Heany, Donald F. Cutthroat Teammates. Homewood, Ill.: Dow Jones-Irwin, 1989.
Larson, Carl E., and Frank M. J. LaFasto. Teamwork. Newbury Park, Calif.: Sage, 1989.
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Title
Section Vll
Power, Influence, and Leadership
----------- Chapter 17
Power and Politics in Project Management:
Upper-Echelon Versus Conventional Project
Management
Paul C. Dinsmore
Dinsmore Associates
Able politicking and skillful power brokering are key to managing projects to successful completion.
Conversely, lack of focus on politics and inadequate handling of power are major causes for disaster on
projects. That thesis was discussed both in papers and in the hallways at the 1988 INTERNET World
Congress on Project Management held in Glasgow, Scotland. Yet in spite of references in the literature,
surprisingly little has been written on this topic, which is so crucial for successfully completing projects.
The arena for practicing power and politics on projects is the project itself and its surroundings. The power to
be wielded in that arena has been defined as the ability to get others to do what you want them to do. Part of
that power may derive from formal authority and personality, yet politics—which has been defined as an
activity concerned with the acquisition of power—is also a strong influencing factor.
Power and politics exist at all levels on projects. In this chapter, attention is focused on two specific levels:
upper-echelon project management, and conventional project management.
This chapter was adapted from Paul C. Dinsmore, “Power and Politics in Project Management,” PM
NETwork, April 1989, with permission of the Project Management Institute, P.O. Box 43, Drexel Hill, Penn.
19026, a worldwide organization of advancing the state-of-the-art in project management.
Upper-Echelon Project Management
In the upper levels of management, how can politics and power be dealt with so that both company and
project objectives are met? A discussion of some of the ways follows.
• Matters are handled through the hierarchy. Corporate culture may demand that all decisions be
channeled through the formal hierarchy. This is effective when the company has a good track record in
managing previous projects.
• An appointed project sponsor (a top manager or director takes on the task. The sponsor in some
cases coincides with the hierarchical superior but is often another upper-level manager assigned the
task of giving political coverage to the project.
• A project council or steering committee assumes the role. When the project spans political
boundaries (joint ventures between companies or joint efforts between areas), the steering committee is
a way to apply consensus decision making to upper-echelon project management.
• Project managers fend for themselves. As a result of managerial vacuums at upper levels, project
managers may find they are expected to do it all. Wise project managers (the ones who survive) work
on building a political umbrella under which project work can progress.
• Outside facilitators are engaged to help guide the strategic process. To avoid political pull and tug, a
neutral facilitator, conversant with both project management and the technology involved, may be
called in to help make things work at the strategic level.
• Experts (lobbyists, arbitrators) are called in on an as-needed basis. This approach is corrective in
nature, as opposed to preventive. It may be required when deadlocks occur at higher levels.
How should upper-echelon project management be carried out? Obviously, whatever works is right. Some
approaches may actually prove inappropriate in certain cases. A steering committee could get in the way of a
particularly effective project manager, or an outside party may simply muddy the waters. Company and
project cultures have to be sized up to see what makes sense.
Yet the risk of neglecting upper-echelon project management is enormous. Frontend strategic and political
effort must be made at the upper levels for projects to derive benefit. That takes forward thinking, early on in
the project life cycle.
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Title
Chapter 18
Sources of Power and Influence
----------- Robert B. Youker
Management, Planning & Control Systems
Power (and politics) is probably the most important topic in project management but at the same time one of
the least discussed. Power in the engineering sense is defined as the ability to do work. In the social sense it is
the ability to get others to do the work (or actions) you want, regardless of their desires. When we think of all
the project managers who have responsibility without authority, who must elicit support by influence and not
by command authority, then we can see why power is the most important topic in project management.
Yet power is a neglected topic in the literature of project management. The words power, influence, and
politics do not appear in the Project Management Institute PMBOK.1 David Wilemon has discussed power in
several of his articles, but there is general agreement in the social sciences that until recently power has not
received sufficient attention. Despite the importance of power in relationships among people in project
management, we seldom deal with the issue directly.
Without power, project managers can accomplish little. As organizations and projects have become more
complex and as project managers become more dependent on more and more persons over whom they do not
have formal authority, they increasingly need power to influence the behavior of others. There can be no
argument that effective performance by project managers requires them to be skilled at the acquisition and use
of social power.
The purpose of this chapter is: (1) to agree on common definitions of power and related terms such as
leadership, (2) to look at a model of the sources of power, and (3) to develop practical guidelines for project
managers on how to acquire and use power.
Definitions
A review of the literature in the social sciences on power quickly reveals a good bit of confusion over
definitions and terms. As Cavanaugh states:
This chapter was adapted from Robert B. Youker, “Power and Politics in Project Management,” Proceedings
of the 10th INTERNET World Congress, Vienna, 1990. Reprinted with permission.
Since Bertrand Russell predicted that the concept of “power” would emerge as a fundamental issue in the
social sciences, forty years of research and theorizing have not yet produced a single, uniform
conceptualization of power. Statements such as “power permeates all human action” or “power . . . is a
universal phenomenon in human activities and in all social relationships” are commonly found throughout the
power literature. Bierstedt used an appropriate analogy when he asserted, “We may say about it [power] in
general only what St. Augustine said about time, that we all know perfectly well what it is—until someone
asks us.” Like time, power is an overlearned concept deeply embedded in our culture. Individuals tend to
define power in highly idiosyncratic terms. Many social science researchers operationalize the variable
“power” based on preconceived notions, individual intuition, or personal dogma.
If it is acknowledged that social power is a concept embedded in our culture, its potency as an underlying
force within many interpersonal and organizational relationships must also be acknowledged. However, the
role of power within these interactions will be difficult to pinpoint without a more systematic means of
operationalizing the concept. Unfortunately, scholars have been unable to bring clarity to the study of the
phenomenon of power. The research remains “scattered, heterogeneous, and even chaotic.”2
Nobody seems to agree about what power and control actually are. Every author has a different definition of
these concepts. Therefore, one of our goals is simply to clear up this confusion by showing what these
definitions have in common and where the major areas of disagreement lie. Hopefully, this exercise will
provide answers to such questions as “How is power different from influence or leadership?” Let’s start with
several definitions.
Power
Kotter also focused on people’s needs and wants when he defined power-oriented behavior as behavior
“directed primarily at developing or using relationships in which other people are to some degree willing to
defer to one’s wishes.”3 And Mitchell called power “the ability for A to exercise influence over B when B
would not do so otherwise.”4
To more fully understand power, we need to compare and contrast power with similar terms such as influence,
authority, leadership, and control. Here, Halal’s analysis is useful.
Power is defined as the potential or ability to exercise influence over the decisions of others, to
determine their behavior to some degree, to establish the direction of future action. Leadership is
the use of power for these purposes. That is, leaders employ various forms of influence to
mobilize followers effectively. Control is the end result or objective of influence. The central
concept that is fundamentally involved in these related concepts of power, leadership, and
control, then, is influence. Influence is regarded in this framework as the underlying process
through which leaders obtain their power to control events. Leaders may derive their power from
a variety of different types of influence, such as the use of physical coercion or force, money and
economic resources, formal and legal authority, social pressure or status, special skills and
knowledge, personal vision and charisma, and possibly other such sources.5
Influence
Authority
The definition of authority is relatively simple. Authority is the formal power given to a person by his or her
position in the hierarchy of an organization.
Leadership
Leadership has been described as “an interpersonal relation in which others comply because they want to, not
because they have to.”7 Leadership is always associated with the attainment of group objectives and involves
the common agreement and commitment to objectives and structuring of roles so people know what is
expected of them. Another way to look at leadership is the use of power to accomplish the purposes of a
group or organization.8
Control
Control is “the process in an organization of setting standards, monitoring results with feedback, and taking
action to correct deviations.”9
Politics
Politics has been defined as “an influence process in organizations to achieve power to change the balance of
power to accomplish your goals or purposes.”10
From these various definitions we can easily see that we have six closely interrelated terms where there is still
a good bit of controversy over precise meanings and where operational definitions for rigorous social science
research are not yet available. But for our purposes of discussion and action, I think we know what we are
talking about.
Sources of Power
What are the sources of power and influence in addition to formal authority that are available to project
managers? The classic scheme of categories was developed by French and Raven more than thirty years ago.11
There have been minor modifications and additions, but their categorization remains the basic model used
today, as shown in Exhibit 18-1. The chart lists the forms of power described by French and Raven, Mitchell,
and Kotter. Some of these forms of power are self-explanatory, and some need further definition. The various
forms are interrelated and do overlap. A discussion of eight forms of power follows.
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1. Rewards. Reward power is seen as the number of positive incentives that B thinks A has to offer.
Title
Can A promote B? To what extent can A determine how much B earns or when B takes a vacation? To
some extent A’s reward power is a function of the formal responsibilities inherent in his or her position.
2. Punishment. Coercive power or punishment has to do with the negative things that B believes A can
do. Can A fire me, dock my pay, give me miserable assignments, or reprimand me? These factors are
----------- again often organizationally and formally determined as part of A’s position.
3. Referent power. In some cases, B looks up to and admires A as a person. B may want to be similar
to A and be liked by A. In this situation, B may comply with A’s demands because of what we call
referent power. This resource is mostly a function of A’s personal qualities.
4. Expertise. A is often an expert on some topic or issue. B often complies with A’s wishes because B
believes that A “knows best” what should be done in this situation. Expertise and ability are almost
entirely a function of A’s personal characteristics rather than A’s formal sanctions.
5. Legitimacy. Legitimate power as a resource stems from B’s feeling that A has a right to make a
given request. Legitimate power is sometimes described as authority. The norms and expectations
prevalent in the social situation help to determine A’s legitimate power: Has A done this before? Have
others complied? What are the social consequences of noncompliance?
Exhibit 18-1. Forms of power.
6. Information. Information is often controlled by individuals within organizations. They can decide
who should know what. To the extent that B thinks A controls information B wants and perhaps needs,
then A has power. This information can be both formally and informally gathered and distributed.
7. Persuasion. This is when A tries to talk B into a course of action. It takes time, skill, and
information, and B must be willing to listen.
8. Connections. Building alliances with influential people within the organization is an important
power base for project managers who must work with and through functional personnel to achieve
project objectives. Developing a variety of informal contacts can help project managers be in a better
position to recognize project problems early.
The nature of power is much more complicated than a simple list. Some of the eight forms of power come
from the organization (formal authority) and some from the individual (charisma). Power can be direct or
indirect through someone else. Power can be possessed or merely perceived, where B thinks A can give a
reward. Power can also be exercised or latent, where A has power but does not use it.
The relative use of the different forms of power also has an effect on project success and personal
relationships. Wilemon and Gemmill’s research indicates that the more effective project managers rely more
on personal types of power, while the less effective managers are concerned with not having enough formal
authority to command and punish.12
Kotter makes a strong case that exceptional managers understand that true organizational power is based
much more on inspirational leadership than on executive rank and status. These managers have achieved their
stature by establishing the power bases that are essential to the exercise of leadership. Kotter believes that the
need for managers who are adept at dealing with organizational complexity will continue to grow. ”A century
ago,” he writes, “only a few thousand people held jobs that demanded that they manage a large number of
interdependent relationships. Today, millions do.”13 This fact mirrors a changing business and social
environment that has grown in diversity as well as in interdependence. The resulting complexity—involving
numerous goals, priorities, and constituencies—inevitably leads to conflict, which in turn can easily
degenerate into bureaucratic infighting, parochial politics, and destructive power struggles. “Dealing with this
pathology,” Kotter writes, “is truly one of the great challenges of our time.”
As shown in Exhibit 18-2, Kotter believes that the need for power is directly related to a manager’s
dependency on and vulnerability to others, especially where he or she does not have formal authority.
Rewards Budget/Favors
Punishment Personnel Appraisal
Referent Power Team Building/Personality
Expertise Technical Knowledge
Legitimatcy Top Management Support/Charter
Information Project Management
Persuasion Plans/Meetings
Connections Meetings Start-Up Meetings
Notes
1. Project Management Institute, Project Management Body of Knowledge (Drexel Hill, Penn.: PMI,
1986).
2. Mary S. Cavanaugh, Ph.D., ”A Typology of Social Power,” Chapter 1 in A. Kakabadse and C.
Parker, eds., Power, Politics and Organizations (New York: John Wiley & Sons, 1984).
3. J. E Kotter, Power and Influence (New York: Free Press, 1985).
4. T. R. Mitchell, People in Organizations: Understanding Their Behaviors (New York: McGraw-Hill,
1978).
5. William E. Halal, “The Legitimacy Cycle,” Chapter 3 in Kakabadse and Parker.
6. Mitchell.
7. R. M. Stogdill, Handbook of Leadership (New York: Free Press, 1974).
8. Ibid.
9. Mitchell.
10. Kakabadse and Parker, “Towards a Theory of Political Behavior in Organizations,” Chapter 5 in
Kakabadse and Parker.
11. J. R. P. French, Jr. and B. Raven, “The Bases of Social Power,” in Darwin Cartwright, ed., Studies
in Social Power (Ann Arbor: University of Michigan, Institute of Social Research, 1957).
12. D. Wilemon and G. Gemmill, “The Power Spectrum in Project Management,” Sloan Management
Review 12, No. 1 (1970), pp. 15-26.
13. Kotter.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 19
Effective Leadership for Building Project Teams,
-----------
Motivating People, and Creating Optimal
Organizational Structures
Hans J. Thamhain
Bentley College
More than any other organizational form, effective project management requires an understanding of
motivational forces and leadership. The ability to build project teams, motivate people, and create
organizational structures conducive to innovative and effective work requires sophisticated interpersonal and
organizational skills.
There is no single magic formula for successful project management. However, most senior managers agree
that effective management of multidisciplinary activities requires an understanding of the interaction of
organizational and behavioral elements in order to build an environment conducive to the team’s motivational
needs and subsequently lead effectively the complex integration of a project through its multifunctional
phases.
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Title The relationship of managerial influence style and effectiveness has been statistically measured.4 One of the
most interesting findings is the importance of work challenge as an influence method. Work challenge appears
to integrate the personal goals and needs of personnel with organizational goals. That is, work challenge is
primarily oriented toward extrinsic rewards with less regard to the personnel’s progressional needs. Therefore,
enriching the assignments of team personnel in a professionally challenging way may indeed have a beneficial
----------- effect on overall performance. In addition, the assignment of challenging work is a variable over which
project managers may have a great deal of control. Even if the total task structure is fixed, the method by
which work is assigned and distributed is discretionary in most cases.
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• Assure management commitment. A project manager must continually update and involve
Title
management to refuel its interests in and commitments to the new project. Breaking the project into
smaller phases and being able to produce short-range results are important to this refueling process.
• Build a favorable image. Building a favorable image for the project in terms of high priority,
interesting work, importance to the organization, high visibility, and potential for professional rewards
----------- is crucial to the ability to attract and hold high-quality people. It is also a pervasive process that fosters
a climate of active participation at all levels; it helps to unify the new project team and minimize
dysfunctional conflict.
• Manage and lead. Leadership positions should be carefully defined and staffed at the beginning of a
new program. Key project personnel selection is the joint responsibility of the project manager and
functional management. The credibility of the project leader among team members with senior
management and with the program sponsor is crucial to the leader’s ability to manage multidisciplinary
activities effectively across functional lines. One-on-one interviews are recommended for explaining
the scope and project requirement, as well as the management philosophy, organizational structure, and
rewards.
• Plan and define your project. Effective planning early in the project life cycle has a favorable impact
on the work environment and team effectiveness. This is especially so because project managers have
to integrate various tasks across many functional lines. Proper planning, however, means more than just
generating the required pieces of paper. It requires the participation of the entire project team, including
support departments, subcontractors, and management. These planning activities—which can be
performed in a special project phase such as requirements analysis, product feasibility assessment, or
product/project definition—usually have a number of side benefits besides generating a comprehensive
road map for the upcoming program.
• Create involvement. One of the side benefits of proper planning is the involvement of personnel at all
organizational levels. Project managers should drive such an involvement, at least with their key
personnel, especially during the project definition phases. This involvement leads to a better
understanding of the task requirements, stimulates interest, helps unify the team, and ultimately leads to
commitment to the project plan regarding technical performance, timing, and budgets.
• Assure proper project staffing. All project assignments should be negotiated individually with each
prospective team member. Each task leader should be responsible for staffing his or her own task team.
Where dual-reporting relationships are involved, staffing should be conducted jointly by the two
managers. The assignment interview should include a clear discussion of the specific tasks, outcome,
timing, responsibilities, reporting relation, potential rewards, and importance of the project to the
company. Task assignments should be made only if the candidate’s ability is a reasonable match to the
position requirements and the candidate shows a healthy degree of interest in the project.
• Define team structure. Management must define the basic team structure and operating concepts
early during the project formation phase. The project plan, task matrix, project charter, and policy are
the principal tools. It is the responsibility of the project manager to communicate the organizational
design and to assure that all parties understand the overall and interdisciplinary project objectives. Clear
and frequent communication with senior management and the new project sponsor is critically
important. Status review meetings can be used for feedback.
• Conduct team-building sessions. The project manager should conduct team-building sessions
throughout the project life cycle. An especially intense effort might be needed during the team
formation stage. The team should be brought together periodically in a relaxed atmosphere to discuss
such questions as: (1) How are we operating as a team? (2) What is our strength? (3) Where can we
improve? (4) What steps are needed to initiate the desired change? (5) What problems and issues are we
likely to face in the future? (6) Which of these can be avoided by taking appropriate action now? (7)
How can we “danger-proof” the team?
• Develop your team continuously. Project leaders should watch for problems with changes in
performance, and such problems should be dealt with quickly. Internal or external organization
development specialists can help diagnose team problems and assist the team in dealing with the
identified problems. These specialists also can bring fresh ideas and perspectives to difficult and
sometimes emotionally complex situations.
• Develop team commitment. Project managers should determine whether team members lack
commitment early in the life of the project and attempt to change possible negative views toward the
project. Since insecurity often is a major reason for lacking commitment, managers should try to
determine why insecurity exists, and then work on reducing the team members’ fears. Conflict with
other team members may be another reason for lack of commitment. If there are project professionals
whose interests lie elsewhere, the project leader should examine ways to satisfy part of those members’
interests by bringing personal and project goals into perspective.
• Assure senior management support. It is critically important for senior management to provide the
proper environment for the project team to function effectively. The project leader needs to tell
management at the outset of the program what resources are needed. The project manager’s relationship
with senior management and ability to develop senior management support is critically affected by his
or her credibility and visibility and the priority image of the project.
• Focus on problem avoidance. Project leaders should focus their efforts on problem avoidance. That
is, the project leader, through experience, should recognize potential problems and conflicts before their
onset and deal with them before they become big and their resolutions consume a large amount of time
and effort.
• Show your personal drive and desire. Finally, project managers can influence the climate of their
work environment by their own actions. Concern for project team members and ability to create
personal enthusiasm for the project itself can foster a climate high in motivation, work involvement,
open communication, and resulting project performance.
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Title
Section VIII
Quality in Project Management
----------- Chapter 20
The Essence of Quality Management
Alan S. Mendelssohn
Budget Rent a Car Corporation
The focus of quality management on projects is to control the process of executing activities to achieve
customer satisfaction. In the past, control of the final results was the primary concern. Now, emphasis is
placed on ensuring that the process is capable of achieving the desired results and can consistently satisfy the
customer’s needs. The way to make this happen is to assure the quality of each step involved in the project.
The outcome of each step must be acceptable to the next person in the process (called the internal customer)
until the end user (the external customer) of the project is ultimately satisfied.
The concepts of customer and process are the essence of quality management. These concepts are discussed in
this chapter, with presentation of the ideas, methodology, and tools needed for implementation.
The Customer
The customer is the next person in the work process who receives the product or service. Whether a customer
is internal or is the final person who receives the product depends on the perspective from which the process
is viewed. Customers first have to be identified and their needs determined before they can be satisfied. This
leads to developing the processes needed to satisfy those needs.
Valid Requirements
A requirement represents a need or want that the customer is looking to have satisfied. This is usually defined
in specifications, through interviews with the customer, or through the manager’s perception of what is
desired. It is necessary to review the requirement with the customer to be sure that it is specific, measurable,
and can be provided in a satisfactory format and time frame. This may involve negotiation with the customer
if the above criteria cannot be met. The requirement becomes valid only after agreement is reached that (1)
the need can be satisfied, and (2) the party responsible for project management agrees to satisfy it. The same
criteria apply in validating requirements for both internal and external customers.
This chapter was adapted from Alan S. Mendelssohn, “Quality—An All Encompassing Concept Critical to
Project Success,” 1990 Proceedings of the Project Management Institute. Reprinted with permission of the
Project Management Institute, P.O. Box 43, Drexel Hill, PA 19026, a worldwide organization of advancing
the state-of-the-art in project management.
Quality Indicators
A quality indicator measures whether a process is satisfying the customer’s valid requirement, based on those
things that are important to the customer—not what is convenient to measure. If the project team uses a
different set of indicators from the customer, its interpretation of success may also be different from the
customer’s. Quality indicators are determined at the same time the valid requirements are identified.
Agreement with the customer on how to measure those requirements and what targets or limits should apply
eliminates misinterpretation later on.
Some valid requirements and quality indicators are given, either in a specification or as a regulatory
requirement. While negotiation with the customer on these items may not be possible, it is still important to
understand and agree that the requirement can be met and that compliance is measurable.
Process
When a process is to be followed on a repetitive basis, it must be controlled to ensure consistent results.
Exhibit 20-1 is an example of a typical process for getting to work on time. In addition to the process
flowchart, also shown are the quality indicator (the time one gets to work) and the process indicators,
represented by the Q and P, respectively. Similar but more complex processes exist within the work
environment itself.
Documentation of the work processes makes them visible. All the steps necessary to achieve the final product
need to be shown. The flowchart for the manager should be at a level of detail which represents those
activities which he or she will personally follow. Each activity block might represent a lower-level process
that must also be controlled. For example, the valid requirements that engineering must meet to satisfy its
customer, the purchasing department, is an equipment specification that is on time, complete, and technically
correct. As shown in Exhibit 20-2, the output of this lower-level process is the input to the next customer
down the line. The quality indicators in the engineering process may be the process indicators in the overall
project process flow.
Process Indicators
A process indicator is used to show whether a work process is stabilized and to forewarn of problems that
could impact final results. There are two kinds of process indicators. The first is used to evaluate the process
itself. The best statistical tool for this is a control chart. Depending on the nature and frequency of the data
collected, different control charts are used. A process can be “out of control” when data fall outside calculated
control limits determined by established statistical models or when the trend of the data indicates an
abnormality. When data fall outside calculated limits, the data must be investigated to determine if a “special
cause” for this out-of-control point exists or if the problem is with the process itself. The problem-solving
process, described later, is recommended for this investigation.
If the indicators show that the targets are being met but the control chart shows that the process is not stable,
then the project has been favored by luck. Process stability is also required for quality to be assured on a
continuing basis.
Upstream Control
When a system is unstable, anything can happen, and it often does. Response to this instability is usually
called firefighting. The manager must motivate team members to stabilize work processes and then give them
the means to make improvements. Improved customer satisfaction comes with process improvement.
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Title Process control requires an understanding of the relationship between the process indicators and the quality
indicator. For example, in Exhibit 20-3, if the forecasted date for turnover of the equipment to the customer is
the quality indicator being monitored, it is also important to follow the schedule for completion of each of the
key activities. If the engineering activity is running late, this has a direct impact on the turnover date, unless
action is taken to correct the situation. By monitoring this process indicator, the manager can predict whether
----------- the customer’s required turnover date can be met or can take appropriate action to improve the situation
before it is too late. By controlling the process upstream of the outcome, quality can be built into each step. If
not, the impact is felt downstream, but not by the people who cause the problem. Correcting those things in
the engineering process that cause delays may also prevent the same factors from affecting future engineering.
The manager needs to prioritize which processes should be improved first. This prioritization is based on (1)
which processes contribute most to the goals of the project in satisfying the customer’s valid requirements,
and (2) which customer needs are not being met, based on the data currently available. As processes are
brought into control and effectively satisfy the needs of the customers, reprioritization takes place as part of a
continuous process improvement program.
Statistical tools are available to help with problem solving. These tools include such things as checksheets,
graphs, histograms, Pareto charts, cause-and-effect diagrams, scatter diagrams, and control charts.
Problem-solving models can also be used to ensure that the real causes are found and that appropriate
countermeasures are implemented. All these models have certain common elements that make them effective,
which include the following:
• Problem definition. Identification of the problem in specific terms is needed before it can be solved.
The data available from indicators and control charts are helpful in focusing the real problem. Pareto
charts to rank problems are also useful.
• Root cause evaluation. In analyzing what the root causes are, it is necessary to keep asking the
questions “Why did that happen? What causes this?” A cause-and-effect diagram is useful in this step.
Once potential causes are found, it is important to verify, by using data, that these are indeed the root
causes. If the real causes are not found, only the symptoms are dealt with, and the problem will likely
reoccur.
• Countermeasures. After the root causes are identified, countermeasures are determined and
implemented. These are aimed at eliminating the root causes. To be appropriate the countermeasures
should contribute to the goal of achieving customer satisfaction.
• Results. If the results do not show the desired improvement, using the same indicators that initially
showed there was a problem, it is necessary to go back into the analysis to determine if additional root
causes exist or if the implementation of countermeasures was not effective. It is sometimes necessary to
go through several cycles to achieve success.
• Standardization. To ensure that the problem will not reoccur, the countermeasures should become
permanent. In other words, the work processes must be modified to include the improvements. This
standardization of improvements in the work process leads to bettering project management approaches
and eliminating firefighting situations.
The problem-solving process can be used by individuals or by teams, whatever is appropriate to solve a
problem. Some common names for groups working on process improvement are quality circles, quality
improvement teams, and process action teams.
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Quality management involves identifying the project’s customers and communicating with them to determine
their valid requirements. Then, the work processes must be designed to be sure that these valid requirements
are met. While the identification part is usually easy, talking to the customer may be difficult. If the
relationship is not good, it may be hard to sit down and talk things over in the spirit of mutual problem
solving. On the other hand, when the relationship is going smoothly, people tend to take it for granted and
don’t bother to communicate regularly. As people in the organization become more proficient in
implementing quality management, this communication, both vertically and laterally, becomes easier and
more open.
The PDCA cycle is the foundation for continuous improvement. As work processes are planned and
implemented, it is necessary to continue to check them to ensure that they are in control and satisfying the
customer’s valid requirements. If not, action must be taken to change the situation and start the cycle over
again.
Management by Fact
Management by fact means two things. First, collect objective data so that the information is valid. Second,
manage according to this information. When people start out with the statement “I think” or “I feel,” question
what they are saying by asking, “What are the data that support what you want to do?” Be sure, however, that
the information is in fact valid. Too often, information is accepted as fact without sufficient review to
understand where the data came from and why they are good data. If a manager is going to make objective
decisions, valid information must be used in this decision-making process.
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Title
Chapter 21
Quality in Project Management Services
----------- Lewis R. Ireland
L. R. Ireland & Associates
This study of three companies providing project management services for the U.S. government focuses on the
negative aspects of the quality of performance as a means of providing lessons learned. It is not the author’s
intention, however, to detract from the reputations of the companies or to imply that the contractual
obligations were not met. These negative features are valuable lessons for others, and this study may well
cause an improvement in the contracting for project management services in the future by public and private
institutions. To preclude criticism of the companies or the government agencies, fictitious names are used for
the companies and the specific names of the agencies are omitted.
The two categories of project management performed for the government are professional engineering
services and professional technical services. Professional engineering services are performed by people
trained and experienced in the physical sciences. Professional technical services encompass all other work
areas performed by personnel with training in other disciplines.
Professional engineering services include studies of engineering requirements, critiques of technical
documentation, logistic analyses, cost estimating, and engineering feasibility studies. Common types of
professionals for engineering services are physicists, mathematicians, mechanical engineers, electronic
engineers, civil engineers, chemical engineers, and hydraulic engineers. (Life science disciplines, such as
medical doctors, veterinary doctors, and pharmacologists, are also contracted for by the U.S. government for
project management services, but they are not included in this study.)
Professional technical services include cost estimating, cost accounting, budgeting, financial analyses, project
scheduling, project planning, preparation of project communication documents, contract administration,
earned value analyses, and critiques of policy and procedure documentation. The performance of the technical
service tasks uses all the engineering and business disciplines, but with a concentration in the areas of
business management or business administration.
Types of Contracts
The U.S. government obtains project management services using two types of contracts: a cost reimbursable
contract and a fixed price/lump sum contract. These two types of contracts vary with the type of fee
associated with each. Thus, the contracts can be of the following types:
• Cost plus fixed fee
• Cost plus incentive fee
• Cost plus award fee
• Fixed price plus award fee
• Fixed price plus incentive fee
• Fixed price
It is generally assumed that cost plus contracts assign the cost risk to the buyer (the government), and fixed
price contracts assign the cost risk to the seller (the provider of the services). The fee associated with the
contract is used to provide an incentive to the seller to meet the buyer’s goals or objectives. The fixed fee
associated with a cost plus contract is the seller’s profit for managing the work and is usually a small
percentage of the total cost. Incentive fees establish a monetary reward associated with meeting
predetermined criteria, such as milestones or a percent completion of a project. Award fees encourage the
seller to meet subjective goals that cannot be quantified but are developed as the project progresses. Award
fee goals are determined as the project moves forward, and the criteria for meeting those goals may change
over time.
There are three companies in this study that provided project management services to the U.S. government in
support of projects of significantly different sizes. The large company, hereafter designated Monarch
Corporation, exceeded 16,000 employees and had the human and dollar resources to bid for and perform on
contracts with values as high as $3 billion. Monarch also had experience in managing and performing on large
contracts for project management services. Monarch provides project management services to the government
as one of its market services, but it is primarily a hardware manufacturer for the government. As a hardware
manufacturer, Monarch has been developing equipment for nearly thirty-five years.
The medium-size company, hereafter designated Swift Corporation, employed approximately 300 persons, of
which the technical staff was approximately 230. Swift is a subsidiary of a parent holding company and relies
upon its in-house resources for any contracted work. The holding company has no additional human or dollar
resources to support Swift’s contracts with the government. Swift has been a single-service (product)
corporation, providing project management services to the government, for eighteen years prior to the study.
The government has been Swift’s only customer.
The small-size company, hereafter designated Coin Corporation, employed fifteen persons, some on contract
from other companies. Coin is a single-service company with limited financial and human resources and has
performed project management services for more than nine years. The history of Coin shows a rapid rise in
business to employ nearly 100 persons at the six-year point, a sudden decline of contractual work in the
seventh and eighth years to less than six persons, and a rebirth and building in the ninth year to approximately
fifteen.
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The type of contract awarded for each of the three companies reflects the level of risk accepted by the seller
(contractor) in contracting with the government. Monarch was awarded a fixed price, award fee contract with
an initial value of $684 million for a five-year period to perform project management services. This contract
----------- was awarded to Monarch after a competitive solicitation in which Monarch bid approximately $200 million
less than the other contractor attempting to obtain the work.
Swift was awarded a noncompetitive, cost plus fixed fee contract for three years. This contract was awarded
without competition with other contractors and provided that Swift would receive a profit fee of 7.8 percent
up to the target cost of the contractual work.
Coin was awarded a noncompetitive, cost plus fixed fee contract for one year that could be modified to
increase or decrease the level of effort as the work progressed. The fee was approximately 8.5 percent.
Exhibit 21-1 summarizes the three contracts and shows the type of contract, the number of personnel, the
duration of the contract, the dollar value of each contract, and the types of services performed.
Exhibit 21-1. Summary of contracts.
Monarch 16,000 Fixed Price, Five Years $684 million Design Critiques Complex
Award Fee Scheduling Logistic
Analyses Contract
Evluations Engineering
Design Software
Validation System
Analyses
Swift 300 Cost Plus Three Years $19.7 million Design Critiques Simple
Fixed Fee Scheduling Logistic
Analyses System Analyses
Documentation
Preparation
Coin 15 Cost Plus One Year $0.7 million Contract Administration
Fixed Fee Complex Scheduling
The quality of project management services rendered by each company is assessed here in terms of
conformance to the requirements. The requirements for the companies were defined in the government’s
statements of work (SOW) and the contract data requirements lists (CDRL). The SOW defines the work to be
performed and identifies limitations or special requirements. The SOW also describes the type of services,
frequency of services, and scope of services. The CDRL describes the documentation, information, and
software that must be delivered to the government.
Because project management services are closer to a “level of effortthan a measurable product, the most
effective control that the government can exercise over a services contract is to focus on the deliverable data,
including software programs as specified in the CDRL. Therefore, the evaluation of delivered plans, briefings,
reports, critiques, and software programs may be the only measure of quality. The criteria associated with the
delivery of these items may be the frequency of submission, the number of copies, the date of submission, and
format.
Conformance to requirements means meeting the performance criteria outlined in the SOW and CDRL for the
project management services contracts. Providing more than is required erodes the profit margin in a fixed
price contract and could jeopardize the recovery of costs in a cost plus type of contract. To provide less than is
specified and contractually required affects the level of the quality of project management services.
Situation #1
Requirement
A directorate requested a planner to write a computer resource management plan.
Discussion
Monarch stated that writers were not in the contract. Agency A had requested planners, which in Monarch’s
view were schedule planners. Thus, the planners proposed and included in the contract could not write plans.
If writers were required, however, Monarch could provide those skills at an additional cost to the contract
through a change of scope.
Comment
Monarch did not plan for the correct skills for the project management services. The requested work would
normally be included in any type of contract of this nature.
Situation #2
Requirement
A directorate requested that a maintenance plan be written for a major system.
Discussion
Monarch prepared and submitted the maintenance plan, but it was rejected during the approval cycle.
Monarch resubmitted the plan three more times and each time it was rejected. The plan was never completed
by Monarch.
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Title Comment
Monarch was not capable of preparing the plan and lacked the expertise to perform the task. Agency A acted
in an arbitrary and capricious manner in continuing to reject the plan. There was little or no effort made to
negotiate the requirements for the plan.
-----------
Situation #3
Requirement
Agency A requested that a greater level of effort be expended upon the job because the work was not being
accomplished on schedule.
Discussion
Monarch had not anticipated a rapid start-up on the work, while the Agency A employees anticipated that a
contractor would be available to assume many of the ongoing tasks. As a result, Agency A employees slowed
the rate of progress just before Monarch’s arrival on site. The combination of Monarch having a slow start-up
period and the Agency A “savingwork until the contractor was in place resulted in nearly doubling the
workload in project management services.
Comment
Monarch’s solution to the problem was to double the number of personnel in the first two years of the
five-year contract and reduce the staff to a minimum level for the last three years of work. This would solve
the immediate problem but would leave Agency A with only a small contractor support group to implement
some of the more critical aspects of the government’s project. Agency A agreed to increase the scope of work
for Monarch, with a resultant increase in cost.
Situation #4
Requirement
One directorate of Agency A requested that Monarch provide services to that area of the government’s
project, but it refused to allow Monarch’s personnel into the directorate facilities. The directorate stated that
the Monarch personnel did not have the requisite skills to perform the tasks.
Discussion
Under this type of contract, the government may not comment on the skills of contractor personnel, but must
rely on the contractor’s judgment as to the skill requirement. Only the end product and the timeliness of
delivery can be raised as an issue for project management services; otherwise, the contract becomes a
personal service contract. The Monarch task group that was charged with providing the services in question
performed routine, in-house tasks in its area for three months and continued to charge for providing the
support.
Comment
The directorate’s lockout of Monarch’s personnel was an interference with the performance of the contract.
Agency A had to continue to pay for services that were not received. This problem should not have occurred
and should have been resolved through the contract administrator, i.e., the executive directorate, when it did
occur.
Situation #5
Requirement
Agency A changed the scope of the contract on several occasions.
Discussion
Agency A changed the amount of work that was to be accomplished by Monarch, in most instances increasing
the amount. Changes to fixed price contracts are negotiable in that the contractor is not obligated to “sell
servicesat a given rate of compensation. The margins on changes to the scope are nearly always much larger
than those of the original contract. Where the contract specified an award fee of up to 12 percent, any change
order will have at least 12 percent, and possibly as much as 20 percent.
Comment
In reality, Agency A’s changes to the fixed price contract resulted in a cost plus fixed fee arrangement. In this
manner, Monarch was able to obtain more work for the same work force and at an improved cost margin.
Situation #6
Requirement
Agency A required the contractor to be fully staffed and operational at a nearby site within three months, an
unrealistic requirement for a project of this size.
Discussion
Monarch assembled a project team in less than three months and established the operational site near Agency
A. This rapid assembly of personnel from locations as far away as 2,700 miles caused a relocation for many
families. The combination of these relocations and stress in the work environment affected the health of
several key managers. Three managers were hospitalized for fatigue, and one suffered cardiac arrest. As many
as six managers were reassigned because of burnout.
Comment
Agency A’s forcing of a provision of the contract that required extraordinary human effort and placed a strain
on the work force created problems that were greater than the original situation. Then, Agency A created a
larger problem by delaying the work and deducting part of the award fee as compensation for the delay.
Situation #7
Requirement
Agency A required several functional problem areas to be resolved by Monarch. These functional areas
bridged several of the directorates or were common to more than one directorate.
Discussion
In response to the requirement, Monarch established working groups for each functional area to be addressed.
These groups met on a weekly basis to address the problem, the progress made toward solving the problem,
and the future actions that were required. The groups held the meetings and prepared minutes of the actions,
which were distributed to more than twenty key managers. Within two months, most of the groups lost their
focus on the problem and ongoing actions. Individuals would not attend the meetings, and managers were too
busy to read the minutes.
Comment
The working groups never fully served their purpose and tended to create more reading material for the key
managers, who did not have time to read the information. The groups slowly disintegrated from lack of
direction, and the initial problems had to be assigned to individuals for resolution.
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It is the author’s opinion that Monarch’s performance was substandard. The primary causes of poor
performance and failure to meet the contract specifications are discussed below.
• Agency A’s SOW and CDRL did not reflect the work requirements of the customers (the
-----------
directorates). Therefore, Monarch could never satisfy the formal terms and conditions of the contract
and meet the customers’ expectations. Agency A’s failure to codify the directorates’ expectations or
change those expectations created a situation that would always be in conflict.
• There was no full understanding and agreement between the buyer (the government) and the seller
(Monarch) as to the wording of the contract. This should have been accomplished prior to beginning the
work. This permitted Monarch to avoid legitimate work that should have been accomplished under the
contract. Furthermore, Monarch was able to increase the scope of work at a cost to the government.
• Monarch did not anticipate the work load and plan for meeting the requirements. There was no
realistic plan to staff the project with skilled personnel who could “ramp upin a short time to meet the
government’s needs. The most obvious effort was just to place individuals on the job, without regard
for productivity, to meet planned expenditure rates.
• Agency A’s personnel slowed their rate of work in anticipation of an early handover of work to
contractor personnel. This slowing of the work greatly increased Monarch’s work load and
commitment of resources. Monarch should have planned a systematic transition of work at a specified
level and not accepted work that was not at the proper level of completion.
• Agency A changed the scope of work, often after much activity had been partially completed. This
consumed resources, wasted effort, and caused major increases in cost. The lack of a unified effort in
developing the SOW and CDRL had major impacts on change order requirements.
• Monarch did not rank the work in order of priority, but attempted to achieve work on a broad front.
Work groups assigned to accomplish the work on an ad hoc basis never achieved greater than 40
percent productivity, while several of the groups detracted from the accomplishment of other functions.
The focus on attempting to complete all the work simultaneously was not a successful approach with
the resources available and the magnitude of the work to be accomplished.
Swift’s Contractual Work
Swift had been contracting with government Agency B for eighteen years prior to the period under study. The
contract, consisting of a SOW and CDRL with standard contract clauses, was evolutionary in that each
renewal was only a minor change to the terms and conditions. The SOW and CDRL were seldom updated to
show the actual work to be performed or the precise documents to be delivered in fulfillment of the contract.
Only the number of authorized person-hours were updated to authorize the expenditure of funds at an agreed
level. The updates usually resulted in increases for most of the contract work with only minor decreases.
The SOW and CDRL were general in nature and did not specify the precise type of work to be accomplished.
Tasking of teams within Swift was performed by the supported Agency B personnel through oral instructions.
Customer satisfaction, or quality, was subjectively measured by Agency B personnel based on responses to
specific tasking. (It should be noted that the contractor-government relationship described here is close to
being a personal service contract, which is prohibited by U.S. law. The law is specific: Government personnel
shall not manage or direct contractor personnel in the performance of work. Work shall be performed in
accordance with the written instructions of the contract, i.e., the technical specification, the SOW, and the
CDRL with contractual clauses.)
Like Monarch, Swift was providing project management services to directorates, divisions, branches, and, in
some instances, individuals. Each element of Agency B established expectations for the quality of project
management services based on its subjective criteria because the contractual criteria were not present. Swift’s
management encouraged this type of subjective evaluation for two reasons: (1) evaluations based on personal
likes and dislikes minimized the risk in terms of total contract performance, and (2) personal evaluations and
satisfaction improved the probability of continuing work through renewal of a noncompetitive contract.
Swift’s management was relieved of the detailed management of the work when Agency B directed the daily
tasks and conducted the evaluations on a real-time basis.
The definition of quality—conformance to requirements—in the Swift contract was not achievable at the top
level. Therefore, one must assess the quality at the lowest level of performing unit within the Swift
organization to determine the degree of quality in the project management services. Thus, the formal process
is flawed when the contract is used as the baseline to measure the quality of the services provided to the
government. Quality must be assessed by some examples of performance.
Situation #1
Requirement
A key manager for Agency B requested engineering and technical studies.
Discussion
Agency B’s manager directed the work of the Swift personnel, established time frames for performance of the
work, defined the format for the reports, and approved the reports. Swift’s personnel performed the work and
delivered the reports. The Agency B manager was pleased with the support, and a smooth, personal
relationship was maintained between the government and contractor personnel. The work was considered to
be high quality.
Comment
The informal relationships, the direct tasking, and the lack of formal criteria for evaluating products places
this work under a personal service contract. Agency B’s position is weak in attempting to justify its payment
of the contractor, if challenged, and in renewing this contract. The contractor is in jeopardy and, if challenged,
may not be paid for performing such personal services.
Situation #2
Requirement
An agency B director tasked Swift with performing project management services in support of a project for
expendable systems.
Discussion
Swift’s supporting personnel performed to a high degree of satisfaction for the director and delivered timely
and quality products, as evaluated by the director. The situation was maintained over a couple of years. The
government then restructured the directorates, and Swift’s project management support was aligned to meet
the requirements. The new director had different expectations for Swift’s personnel and different criteria for
quality. It required several months for Swift to work into a smooth relationship and produce high-quality
products again.
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Title Comment
The use of subjective criteria for evaluating contractor performance to meet contractual obligations do not
work well when government (buyer) personnel are changed. The expectations for quality work are based on
the buyer’s experiences with previous contractors. The lack of formal criteria in the contract precludes
----------- evaluation of the performance (quality) of the contractor’s work from an objective baseline.
Situation #3
Requirement
The director of a group requested and received project management services in support of the acquisition of a
major surveillance system.
Discussion
Agency B’s director and Swift’s task manager enjoyed an excellent relationship, and the quality of work was
considered high. There was complete compatibility between the government and contractor personnel, and a
letter was even sent to Swift praising the support personnel. There was, however, no contact between Swift’s
senior management and the director. Because of this poor high-level communication, Agency B lost
confidence in Swift’s capability to expand the work force to meet new project management requirements.
Consequently, the director contracted with a second company for similar types of services, but at a lower level
of effort. This slowly eroded Swift’s position as a contractor providing project management services although
the perception was that Swift was performing better than the new company.
Comment
Swift’s senior management failed to maintain contact with the customer to obtain feedback on the customer’s
desires and to instill confidence in the company as the contracting entity. The second company’s senior
management was in contact with the director once or twice a week by personal visit or by telephone.
Situation #1
Requirement
Agency C directed that the scheduling information be loaded into a computer by remote terminals. The
computer was located seventeen miles from the collection site and operated by the contractor for computer
services.
Discussion
Problems with accessing the computer were apparent during attempts to input data by the remote terminals.
The contractor operating the computer stated that the problem was with the speed of the modem transmission
device, 1,200 baud versus 4,800 baud. Next, it was stated that the computer’s random access memory had
insufficient capacity to process the files. The situation was resolved by moving Coin personnel to the
computer site to input data through a terminal with a direct connection. At that time it was learned that there
were several irregularities with the computer system. The computer system contractor was preempting the
computer through a priority procedure to process administrative information for another project, and the
number of end users on the computer exceeded the number planned for that system.
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Title Comment
Coin’s loss of control over the computer assets created problems when the computer operators preempted the
computer for processing jobs not related to the project. Coin’s inability to identify and fix limitations of the
computer system affected Coin’s ability to accomplish the work. It is the author’s opinion that the tools and
----------- personnel to do the work must be under the control of the same work group.
Situation #2
Requirement
Agency C specified that the reports of the schedule were to be in two formats, a network and a tabular listing.
Discussion
Attempts to produce the networks were frustrated by incorrect lines being drawn to connect the boxes
representing activities. Connecting lines would often exit from the leading end of a box rather than from the
trailing end. This gave the impression that the subsequent work started before the first activity was completed
rather than that work could not begin prior to the completion of the activity. The computer services contractor
maintained that the problem was the insertion of erroneous data into the menu during Coin’s loading process.
It was subsequently learned that this software was a beta test version that had not been fully tested prior to
use. The computer services contractor was aware of this situation and failed to inform Coin of the use of a
potentially erroneous software program.
Comment
The use of beta test software in a contract that requires precise reports should be avoided to limit the
perception of quality problems in the input process. Moreover, the contractor responsible for the end product
should be informed of the developmental status of any software program that is in use.
Situation #3
Requirement
The COTR was to coordinate the availability of managers for the collection of data with which to build the
networks.
Discussion
The COTR did not work well with the other Agency C managers to obtain their support in providing Coin
with the required data for the networks. This resulted in the consumers providing insufficient data to build the
networks with the logical sequencing relationships. The managers responsible for providing the data assumed
that the builder of the network—i.e., Coin personnel—had the knowledge with which to construct their
schedules. In fact, the Coin personnel did not have knowledge of the specific network activities, but had
knowledge of scheduling practices.
Comment
The knowledge for scheduling comes from the contractor while the knowledge of the specific activities and
tasks with their sequential connections comes from the operational personnel—in this instance, Agency C
managers. The negotiation at the time of contract award of who will provide the data would preclude such
problems.
Situation #4
Requirement
Agency C had a specified completion date on the schedule reports to meet the requirements of other related
work.
Discussion
Coin personnel were inexperienced in the operation of the terminals and the menus for inputting data. This
inexperience dictated that the input operators receive three days of instruction. This time for the personnel to
learn the computer/software applications was in the middle of the collection and input process. It was not until
three months after initiation of the project that it was determined the Coin personnel were not sufficiently
trained. Other computer problems masked the fact that the Coin personnel lacked the necessary skills.
Comment
Beginning a project with trained personnel assists in the rapid start of operations. Complex problems with the
tools, such as those experienced by Coin, limits the identification of skill shortfalls and mitigates against the
proper execution of a contract.
Summary
Coin’s performance (quality) is considered less than desirable because it did not have or take action to train
personnel for the required work. The government manager (COTR) made the situation more difficult because
of instability in the requirements and poor coordination of data collection requirements. Furthermore, the
design of the task organization with two contractors (one for development of schedules and a second for
control of computer equipment) was flawed because of communication barriers through inconsistent goals.
The more important causes of poor performance are listed below.
• The government’s design of the remote computer operation and the control of the computer center by
another contractor were not supportive of the efforts assigned to Coin. The physical configuration and
preempting of the system by the operating contractor materially affected Coin’s performance capability.
• The contractor operating the computer center willfully accepted beta test software that had the
potential for errors because it had not been previously tested for release and sale to the public. When
the software program produced improper results as the end product of Coin’s work, it reflected badly
upon Coin as the provider of services.
• The government COTR was to coordinate the data collection schedule with other managers, and Coin
personnel were to build the network with these data. The failure of the COTR to adequately explain to
other managers the need for schedule data and the accuracy of data impacted Coin’s ability to build a
valid network that depicted the plan for the government’s work.
• Coin failed to provide trained personnel for the task or to ensure personnel were trained upon receipt
of the contract. Coin management’s failure to recognize the skill requirements for satisfactory
completion of the task was a major contributing factor to poor performance in data input and product
development.
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Conclusion
Contracting for project management services, from both the buyer’s and the seller’s perspective, should be
well planned and mutually understood as to the requirements of the work. This forms the basis for
determining the quality of services, any changes to the scope of work, and a baseline for evaluating the
performance of services. Planning the work requires setting goals, often stated in terms of expected results,
and defining the scope of work. The buyer, in preparing the contract, should avoid instructions that describe
how the work will be performed and with which skills, instead focusing the descriptions on end products to be
delivered at specified times. The buyer should plan to be in a monitoring role during the contract
implementation and become involved in the processes by which products are developed only when the
contract is not being fulfilled.
The seller of project management services is obligated to understand the requirements and provide the skills
that can best meet those requirements. The requirements, defined in the contractual documentation, set the
standard for all work to be performed. A mutual agreement between the buyer and seller as to the terms and
conditions of the contract is the baseline for the seller to achieve customer satisfaction. Flawed or faulty
contracts that do not promote agreement with the actual requirement limit the opportunities for customer
satisfaction in project management services.
References
U.S. Government, Federal Acquisition Regulations (FAR), Washington, D.C.
U. S. Department of Defense, Defense Acquisition Regulations (DAR), Washington, D.C.
U.S. Department of Transportation, Acquisition Regulations, Washington, D.C.
U.S. Department of Defense, DOD Instructions 5000.1 and 5000.2, Washington, D.C.
U.S. Public Law, Competition in Contracts Act of 1984, Washington, D.C.
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Title
Part II
Project Management Applications
----------- Section IX
Project Management and Change Management
Chapter 22
Managing Change Through Projects
John R. Adams
Western Carolina University
The purpose of this chapter is to analyze the change process in an effort to understand the part project
managers play in implementing changes within the organization. The change process itself is examined first,
from the standpoint of its effect on both the organization and the individuals who make up that organization.
Next, the project management process is reviewed to analyze its impact on the organization that supports it
and to document the relationships between project management and the change process. The requirements for
successfully implementing projects and planned organizational changes are shown to be essentially identical.
In this way, the role of the project manager is shown to include the tasks of the “change masters,” with all of
the pressures and responsibilities that the term and the concept implies.
Since most modern organizations wish to survive for a long time, their choice must be to manage the change
process, making every effort to adapt as an organization to the changing needs they are attempting to serve.
The result is that organizations must use a process for defining the needed changes, developing plans for
implementing those changes, and then implementing those plans with the objective of modifying the
organization to meet predicted future needs.
There is common agreement that project management is a goal-directed activity. That is, the basic definition
holds that a project combines human and nonhuman resources for the purpose of achieving some specified
goal. Project management is thus a set of management practices designed to accomplish a specific goal.
Project management theory adds to this basic definition by indicating that the goal should be accomplished
within specified funding and resource limitations through the development of a formal or informal temporary
organization brought together for the express purpose of accomplishing that goal. In short, project
management can be considered a specified management process with the express purpose of achieving a
defined goal at some specified time in the future.
Projects thrive in an environment of change. They are generally established by some level of management
senior to those implementing the work; that senior level provides a goal or objective that the organization is to
achieve. In effect, senior management has reviewed the future of the company and defined the future state it
wishes to achieve. The project is established to take the organization from its present condition to what is
projected to be needed in the future. In short, project management implements the transition state of the
change process. It is clear that the extent to which the project is successful determines the extent to which the
organization is able to adjust satisfactorily to the conditions its management foresaw would exist in the future.
Thus, project management can be seen as the means by which the activities needed to achieve the future goal
are defined, scheduled, implemented, and accomplished, while the project can be seen as the means by which
the needed change is planned and implemented. Project management is crucial to the change process in that it
is the means by which organizations can control or manage their adaptation to projected future requirements.
Change implemented within an organization is implemented through people and affects the way some or
many people go about their work. For example, the construction of a new work facility may require people to
change their working location, the way they travel to get to that location, the conditions within which they
work at the facility, and even the location of their home, since most need to live relatively close to where they
work. A new computer program may require managers to change the way in which they make decisions, since
new reports with new information may be available to them. Others must collect different items of data and
enter them into the computer in new ways. Still others have to learn the program and be able to maintain,
support, and modify it to meet the changing needs of the organization. The development of a new product
requires changes in production workers’ jobs, while marketing personnel need to learn the new products and
perhaps develop new marketing techniques and advertising programs. Since the company may enter new
markets and may have to build new production plants and develop new production methods for dealing with
the new product, a successful new product development may lead to many additional projects affecting many
hundreds of people throughout the organization.
Through all this, project managers are the catalysts for implementing change, and as such they are targets for
the resistance and anger that often accompanies the introduction of a change process. In addition, as the
project is implemented through its life cycle, the project itself is subject to change. Schedules and budget
requirements change. Personnel may leave the project, as their particular services are completed, while others
may join the project as their skills are required. The very goals of the project may be adjusted as senior
management clarifies its needs or as further changes occur external to the organization. In this way even
members of the project team must deal with the change process as it affects them and the jobs they are
performing. If the project managers are to implement changes of this magnitude, it is appropriate that they
understand the process individuals must go through to adapt to the changes imposed upon them.
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Title The basic process by which an individual recognizes and adapts to change is demonstrated in Exhibit 22-2.
Most individuals prefer stability. They enjoy being able to predict what they are likely to be doing in the
reasonably near future. Thus, most individuals prefer to work in the same location from day to day, or to draw
a paycheck on a regular basis, or to have a consistent set of friends with whom to socialize. The condition of
stability is represented in Quadrant I of the exhibit. During this period, individuals should be examining their
----------- work environment for potential sources of changes, so that they may predict how their behavior may have to
change in the near future. Most, however, fail to recognize this necessity. Nevertheless, at some point in time,
some event occurs that imposes itself upon individuals as a change in the way they work or live.
Quadrant II represents individuals becoming aware of a change being imposed upon them, and the reactions
that are likely to occur. Individuals typically do not approach change in a logical manner, at least not initially.
People react to significant change emotionally. The more significant the change, the more emotional
resistance is likely to be demonstrated. They place blame. (“It’s Bob’s fault: He’s been late with those reports
so many times that it was obvious the boss would have to put controls on us! If it weren’t for him, I wouldn’t
have to spend the next two months developing a new reporting process.”) Or they seek justice. (“Well, it’s not
my fault. My work’s been done on time and regularly. I’ve met every deadline the boss has set for me in the
last two years, even though I haven’t been recognized for it much.”) Generally, individuals work through the
stress and anger that typically follows the announcement of a significant change, and then they begin to
consider how the new process or technique may help them. Eventually, most come to understand and accept
that the change will take place. Depending on the magnitude of the change and its impact on them, however,
this emotional reaction could take a long period of time to work through, with the attendant reduction in both
commitment and productivity. Only when the point of acceptance is reached can progress be made in
implementing the change.
At this point, individuals can begin logically evaluating the impact of the change on them and how they can
best react to it. This is represented in Quadrant III, where a problem-solving process is used to determine the
individual’s possible options for implementing as appropriate a response as possible. In this quadrant, it is
feasible to implement a logical decision-making process for identifying and examining the options available
and for selecting the most appropriate option for the individual and the organization concerned. Once an
alternative is selected—that is, once the decision is made—it is time to implement that decision.
Quadrant IV represents the process by which the necessary activities are defined and assigned to those who
must accomplish them, and the new methods, processes, or products are integrated into the normal work flow
of the organization. Such implementation activities finally result in the actual response to the need for change
that was originally defined. The organization can now settle into a new period of stability—that is, until the
next need for change is identified, and then the process continues.
Every individual in every organization must go through this process each time a change is implemented.
Some individuals proceed through the process rapidly, while others may agonize over their response to a
change for seemingly endless periods. There are many reasons for this difference, not the least of which is the
magnitude of the change itself, the impact that change is likely to have on the individual, and the criticality of
that change to the individual’s job. It is clear, however, that high levels of stress and anxiety are associated
with this change process. The levels of stress and the expressed resistance to change are increased
dramatically as the time available to react is reduced.
This implies some clear guidelines for managers involved in implementing change, particularly the project
managers who must cope with the individuals affected by the change they are implementing. The manager
must first provide the time necessary for individuals to work through the emotional phase of accepting the
change. More important, time and effort must be committed to developing a sense of trust and the supportive
working relationships that help individuals proceed rapidly through Quadrant II. From the project manager’s
standpoint, productive work cannot be accomplished until the individuals affected by the changes have
completed their transition through Quandrant II and can begin to look at alternative methods and techniques
for adapting to the change. A cooperative and supportive working environment can speed the individuals’
adaptation to the required change, but it cannot eliminate the need for dealing with the emotional reactions to
change that will exist.
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Title With this perspective, it is easy to see how an organization that has been successful in developing such a
bureaucratic structure would strongly resist the need for change by either the organization or the individuals
within it. Change in this environment is something perpetrated by troublemakers. It results from poor
planning, since appropriate planning would have developed the best approach for doing the job in the first
place. Since change disrupts the status quo, it may affect the efficiency with which the organization produces
----------- its products, and therefore it is to be avoided. If a change must be implemented, then it must be controlled
rigidly and implemented quickly to avoid unnecessary disruption of the work. This view of change may be
very appropriate in an environment where change does not occur frequently. Unfortunately, such stable and
predictable environments are quickly disappearing from the society in which we live.
The drawbacks to such an organization’s structure have been documented thoroughly over the years. Perhaps
the best summation is provided by Harold Kerzner in his book Project Management for Executives. The
essence of his view is summarized in Exhibit 22-3. Kerzner draws upon the well-known difficulties of
communications, both vertically through the structure and horizontally across functions, to define “islands of
operations” within which individuals can work together and understand each other easily. The difficulty of
vertical communications deals with the differing experiences and perspectives of the individuals at different
levels of the organization, as well as the power differentials among these levels. When combined, these issues
make it difficult for individuals lower in the organization to report problems and concerns accurately and
concisely to senior-level management. It thus becomes difficult for the senior levels in the organization to
know what is going on at the lower levels. It is equally difficult to communicate across functions within the
organization. Each function is narrowly defined, individuals within the function are narrowly educated in the
fields the functions support, and each function has developed its own terminology and perspective of the
organization as a whole. Since the jobs themselves are narrowly proscribed and job descriptions are tightly
defined, communications across these functions become increasingly difficult to understand as we proceed
lower in the organization. The overall results are communications and coordination difficulties, which in turn
make implementing change a very difficult and time-consuming process.
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Title
-----------
Conclusion
Change is inevitable in our society, and it is clear that those organizations that refuse to adjust will fail to
survive in the long run. In particular, if business, services, and government organizations are to survive,
prosper, and meet the needs of their clients, they must plan for and implement change as a recognized part of
the organizations’ strategic plans. The individuals within the organizations must also be considered in any
such change process. They must be provided with the time to accept the fact that the change is necessary,
develop any new skills that may be required, and participate in the change being implemented.
Project managers who are capable and dynamic leaders must be selected and developed specifically for their
skills in implementing change in a cooperative and nonthreatening manner. Such an approach will not ensure
the survival of the organization or the cooperation of the individuals within that organization. No one can
assure that the organization can successfully adapt to whatever unknown changes may be required of it.
However, failure to take this approach and allow both senior and project managers to provide the concentrated
management attention needed to assure goal accomplishment will ensure that the organization will fail. It will
simply not be capable of meeting the needs of its clients in the long run. As the environment within which the
organization functions becomes more dynamic (as predicted by practically all futurists in our society), and as
the costs of adapting become greater, the well-developed, capable, and committed project manager will be
ever more critical to the success of the organization.
Bibliography
Adams, John R., C. Richard Bilbro, and Timothy C. Stockert. An Organization Development Approach to
Project Management. Drexel Hill, Penn.: PMI, 1986.
Kanter, Rosabeth Moss. The Change Masters. New York: Simon & Schuster, 1983.
Kerzner, Harold. Project Management for Executives. New York: Van Nostrand Reinhold, 1982.
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 23
Planning for Change
----------- Stephen D. Owens
Western Carolina University
M. Dean Martin
N. Western Carolina University
The project-management organizational approach is suited to deal with environmental change, both internal
and external to the project. However, the management of change does not automatically occur with the use of
project management techniques. Rather, change stimuli must be analyzed on a systematic and consistent basis
or the need for change is not detected, and corporate as well as project goal accomplishment suffers.
Environmental screening and corrective action are an innate part of strategic planning. This is especially true
as organizations become more involved in the international arena. Such an attitude and practice must
permeate each organizational entity, including the project organization. For this to occur the project team
must be included in the strategic planning system. Thus, planning for change becomes an organizational goal.
Of necessity, the human element must be recognized and integrated into the change management system.
Some speculate that resistance to change is an inherent human characteristic; however, the authors don’t
entirely accept this premise. This chapter posits that there are ways to design and develop a change
management system that motivates the project team to be innovative and competent when analyzing the
inevitable change elements that are involved in project implementation. Moreover, the chapter investigates the
basic nature of change in the project environment and examines the elements that must be considered when
designing and developing an effective strategic planning process.
The project management organizational approach is theoretically well suited to deal with environmental
change, both in response to stimuli from internal as well as external sources. However, project managers must
be aware of the diverse sources of change and be able to detect and deal with change effectively.
A stimulus for change may originate from a source internal or external to the organization and the project.
External sources are generated by activities in the organization’s macro environment. This situation is
reflected in Exhibit 23-1.
External Sources
The project team has little if any control over external change forces. Early Detection may provide an
opportunity to take action, but these external sources are basically uncontrollable. These sources often include
the following:
• Political and legal. Federal, state, and local governments frequently pass laws that impact the
organization and the way it operates.
• Economic. Factors such as increased competition, inflation, high interest rates, and material shortages
may require project cost revisions.
• Social. Project demand is a derived demand. Changing consumer tastes, attitudes, values, and needs
may necessitate project changes.
• Technological. Project plans may envision the use of certain materials. Improved composites and
metal alloys may require project redesign or even abandonment.
• Ecological. Increasing concern for the physical environment has led to operational restrictions. Most
construction projects typically involve the need for an environmental impact evaluation.
• International. Competition has become increasingly global in scope. This development has required
project managers to become familiar with the cultures of countries very different from their own.
Internal Sources
As the external sources are detected and plans for them are formulated, changes internal to the project must
also be examined. Troublesome internal sources often include the following:
• People. It is easy to see that corporate management succession, project manager replacement, and
other human resources actions can create conditions that necessitate the need for change management.
• Management. A change in management philosophy may necessitate a change in organization
structure, i.e., the change from a functional organization to some variant of project management. A
formal organization development program may be necessary to implement the new management
philosophy.4
• Processes. New technology has required many changes in both manufacturing and management
processes.
• Policy. The need for cost, schedule, and quality control has led many organizations to question their
policies in terms of how project managers are assigned, appraised, and compensated.
Such variables, while not totally controllable, can be managed more than those from external sources. These
illustrations should suffice to establish the fact that the project environment is very complex and is fraught
with the potential for changes to develop and impact both the overall organization and the project. The key
becomes one of detecting the need for change. This is best accomplished by understanding the role of the
strategic planning process.
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Environmental Screening
Project managers must screen the environment for possible opportunities and threats. Information about
environmental variables must be identified, monitored, evaluated, and disseminated to key persons within the
project. Screening the environment must occur to avoid surprises and monitor factors that impact future
project success or failure.8 Essentially, then, roles must be created in the project organization to process
information, to coordinate the project with key persons in the organization, and to represent the organization
to the environment.
These activities must be performed in a manner that actually spans both the macro and micro environments.
The dynamic variables that interact within these two domains are depicted in Exhibit 23-3. The micro
environment is concerned with the culture of the parent organization. Each project must compete for resources
with other projects and depends on other organizational elements for support. The macro environment is
structured by inputs external to the company and the project organization. These factors require the planners
to screen the external environment to assess opportunities and threats that fall into one or more of these
categories. For example, the construction of an electrical power-generating plant involves the development of
an environmental impact statement and negotiations with various regulatory agencies on the federal and state
level.
A key issue in this area is the assessment of project uncertainty. Environmental uncertainty for a project can
relate to cost, schedule, or performance. For a large company with multiple projects, the use of a permanent
team to assess and measure uncertainty as related to the micro and macro environments is a possible
organizational alternative.
Project planning is an output-oriented activity or process, concerned with determining in advance specifically
what should be done, how it should be done, when and where it should be done, and who should do it.
Planning, pure and simple, is the process of preparing for change and coping with uncertainty by formulating
future courses of action. Planning can also be viewed as a form of decision making and problem solving. The
process involves establishing project objectives, premising, determining alternative courses of action,
evaluating alternative courses of action, and implementing the alternatives.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title Theoretical issues as to the types of plans, preoccupation with the process itself, and a short-term focus quite
often lead project managers to the conclusion that planning is a simple function. This form of planning
myopia can be counterproductive to the individual and the organization. The key is that planning must be
accomplished. It must deal with strategic planning (involving time frames in excess of one year), with
operational planning (the one-year budget), with activity planning (weekly or monthly), and with daily
----------- managerial planning. For each company and its projects, some balance between the various types of plans
must be attained. It’s important that project managers not focus on operational and activity planning and
ignore the need for strategic planning.
Planning as such is a line function. Yet managers are generally too busy to activate and implement the
planning process. As a consequence, many companies have a staff activity to initiate the cycle and to
coordinate the many activities that must be accomplished to complete a planning cycle. An additional
complication is that in any given time period, actions must be completed that deal with all four types of plans.
However, the major difficulty derives from the nature of change and its accelerating rate.
This high rate of change creates environmental uncertainty. Few companies and fewer project managers are
prepared to deal with uncertainty whether it relates to cost, schedule, or performance.9 The company and the
project exist as part of a system (as shown in Exhibit 23-3). Environmental forces emanate from political,
economic, technological, ecological, and sociocultural domains. These changes directly impact the company,
the project, and the cost, schedule, and performance parameters.
Conclusion
The rate of change in our complex environment is increasing at an explosive rate. Constantly changing
conditions require the project manager to detect and track events occurring in both the macro and micro
environmental areas. Environmental screening is thus an essential task for project managers. Effective
screening results in the design and development of proactive responses to the diverse changes buffeting the
project environment.
An integral requirement for predicting and dealing with incessant change is the organization’s ability to plan.
Planning has been identified as the primary management function. However, many project managers do not
participate in their organization’s strategic planning system and are not rewarded on the basis of their
planning effectiveness. However, the strategic plan for a company serves as a road map for managers at all
levels, including the project manager. The project staff must be involved in the development of the strategic
plan and must understand its premises and assumptions. The basic idea through this process is to identify
opportunities and threats and to assess accurately the organization’s strengths and weaknesses so that
objectives can be attained or revised accordingly.
In order to participate in planning, project managers must understand the strategic planning process. This
process typically follows a logical series of steps included in the planning, programming, and budgeting
cycles. Unfortunately, project managers are generally so busy dealing with crisis situations of an operational
nature that they frequently fail to become involved in or even to understand the company’s strategic planning.
Many times they are not allowed access to the company’s strategic thinking. Further, most project managers
see no reason why they should be concerned with the long-range strategic plan.10 However, project managers
must be active participants in long-range planning. They have the unique opportunity to screen the external
environment and identify those trends that could either generate new opportunities or require changes in
corporate objectives to meet emergency threats. Unfortunately, poor planning and an unwillingness to deal
with foreseeable change continue to plague projects. A more structured planning effort involving team
members can help to ensure both project and organization success.
Notes
1. R. Daft, Organizational Theory and Design, 2nd ed. (St. Paul, Minn.: West Publishing, 1986).
2. A. Toffler, Future Shock (New York: Bantam, 1971), p. 9.
3. M. D. Martin and M. McCormick, “Innovation and Change in the Project Environment,” 1984
Proceedings of the Project Management Institute, Philadelphia (Drexel Hill, Penn.: PMI), p. 110.
4. J. Adams, R. Bilbro, and T. C. Stockert, An Organizational Development Approach to Project
Management (Drexel Hill, Penn: PMI, 1986), pp. 7-8.
5. P. Drucker, Management: Tasks, Responsibilities, Duties (New York: Harper & Row, 1974), p. 122.
6. M. D. Martin and S. D. Owens, “Management Change in the Project Environment,” Proceedings of
the 32nd Annual Meeting of AACE, New York, 1988, p. 6.3.
7. M. D. Martin and P. Cavendish, “Product Management in the Matrix Environment,” in D. Cleland,
ed., Matrix Management Systems Handbook (New York: Van Nostrand Reinhold, 1984), p. 172.
8. T. L. Wheeler and J. D. Hunger, Strategic Management and Business Policy, 2nd ed. (Reading,
Mass.: Addison-Wesley, 1986), p. 90.
9. J. R. Adams and M. D. Martin, “A Practical Approach to the Assessment of Project Uncertainty,”
1982 Proceedings of the Project Management Institute, Toronto, Canada, October 4-6, 1982 (Drexel
Hill, Penn.: PMI, 1982), pp. IV-F, 1-11.
10. J. Adams and M. D. Martin, Professional Project Management: A Practical Guide (Dayton, Ohio:
U.T.C., 1987), pp. 43-44.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 24
A Process of Organizational Change From
-----------
Bureaucracy to Project Management Culture
Robert J. Graham
R. J. Graham and Associates
This chapter relates a process followed by one organization in an attempt to change from a
bureaucratic-oriented culture to a project management culture. The organization involved flourished in the
bureaucratic mode with limited competition and stable products and services. However, it found itself in the
intensive world of deregulated financial services. As more and more projects were developed to respond to
the new environment, the company executives discovered that their project management practices were
reflections of their bureaucratic past rather than of their project management future.
Attempts to teach managers the basics of project management were not successful. The newly trained people
found that the practices necessary for successful project management were not supported by the departments
in the organization. From this experience, company executives came to realize that the culture needed to
change in order to respond effectively to the new business environment. The process they followed in order to
achieve that change is outlined here. This process is presented as an example of the steps needed to install
sound project management practices into a business organization.
An Organizational Example
The organization described in this section will be referred to as OE (Organization Example). This
organization is used to illustrate the types of problems typically encountered by bureaucratic organizations. It
is also used to illustrate how the change process described in the previous section can be applied for
organizational change.
OE’s business began with a series of local offices selling consumer financial services. As the business grew, it
became necessary to develop a general procedure’s manual so that offices across the country would run
according to the same principles and procedures. This manual was developed to such a degree that placement
of everything in the office was defined so precisely that any manager could walk into any office and know
exactly where everything was. A highly structured organization grew up to support these procedures, and OE
flourished as a result.
With such standardized procedures and with everyone going by the same book, it became part of the OE
culture that people were interchangeable. That is, it was assumed—and it was true—that any manager could
run any office. This assumption of interchangeable parts, such an asset in earlier years, later proved to be
quite an obstacle to proper project management. The assumption led to the practice of continually moving
people from project to project and changing the compositon of the team as the project progressed. As this was
common practice in the past, many managers failed to understand that in the project management world,
people are not as interchangeable as they were in the past. Some of the general differences between a
bureaucratic culture and a project management culture—which OE experienced—are summarized in Exhibit
24-2.
OE went through a tumultuous change as a result of the deregulation of the financial services market.
Suddenly there were more competitors and fewer people on staff. This combination generated a sudden
increase in the number of “special projects” in the organization. Most of these new projects involved
computer technology, so that projects and project management became associated with the computer
department. As there was little history of project management in the organization, it seemed natural that the
project managers should come from the computer department. This assumption proved to be another obstacle
to proper project management.
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The basic problem was that the person managing the project was not from the department that initiated the
request. As such, the project manager had little formal responsibility and accountability other than making the
product work technically. He or she had no formal responsibility to make certain that the product performed
the way that the initiating department had envisioned.
“Accidental” project managers thus arose from the technical departments, and procedures evolved somewhat
haphazardly. Each department involved mostly responded to requests and were content to do only as
requested. They did not share ownership of the final product. As the project manager was not ultimately
responsible for achieving end results or benefits, the role evolved into one of project coordinator. As such,
project success depended more on informal contacts, as there was little formal methodology. The role of
project manager was highly ambiguous and thus not an envied position.
In addition, there was little concept of a continuing project team. People were often pulled onto a project as
needed, and they were just as often pulled off a project in the middle of their work. As the project was
identified with the computer department, contributing departments did not feel it necessary to keep people on
a project for its duration. Thus, team membership was fluid, and there was often loss of continuity.
Despite all of these problems, there were some OE projects that were decidedly successful. However, there
were others that were definitely unsuccessful. After a few of these failures, upper management decided that it
was time for a change. This is the normal procedure with any decision about change. Any group will hold
onto a set of procedures for as long as the procedures do not cause problems. One failure is usually not
enough to change people’s minds. After a few failures, the need for change becomes clearer.
To begin the change toward better project management, a conference of senior managers was arranged to
examine what was right and what was wrong with project management practices at OE. At that conference the
managers listed those projects that were deemed to be most successful and those that were judged to be less
successful. One division president became extremely interested when he realized that most of the failures
were from his division. This realization was a fortunate occurrence as he then became the champion for the
management development program that was later developed.
From the analysis of the “winners and losers,” it became fairly clear what behavior patterns had to be
modified. The senior management team then began the task of defining the new behavior, at least in outline
form. Some of the changes in behavior defined were as follows:
• The project manager should be a defined role. The project manager should be designated from the
user department and held accountable for the ultimate success of the project. It is up to the user
department to define the specifications and see that they are delivered.
• A core team of people from the involved departments should be defined early on in the existence of
major projects. The people on the core team should, as far as is possible, stay on the team from the
beginning until the end of the project. The project manager is responsible for developing, motivating,
and managing the core team members to reach the ultimate success of the project.
• A joint project plan should be developed by the project manager and the core team members. This
project plan should follow one of the several project planning methodologies that were in use in the
corporation. The specific methodology was not as important as the fact that the planning was indeed
done.
• A tracking system should be employed to help core team members understand deviations from the
plan and then help them devise ways to revise that plan. The tracking system should also give good
indications of current and future resource utilizations.
• A postimplementation audit should be held to determine if the benefits of the project were indeed
realized. In addition, the audit should provide a chance to learn lessons about project management so
that projects could be better managed in the future.
These points formed the basis of the project of instilling a project management culture in OE. A case study
was also developed, based on a project failure, for use in the subsequent training program for the new project
managers. This case study highlighted how things went wrong in the past and what behavior needed to be
changed for the future.
Defining new behavior is not all that difficult. Realizing the new behavior, however, is quite a different
matter. At this point the people from the management development area began to determine development
needs. They began to ask the question of how to teach this new behavior throughout the organization.
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Title This posed significant problems. In order to implement project management, the role of the project manager
had to be redefined. In addition, people throughout the organization had to understand the new role of the
project manager. This person was no longer to be just a coordinator but a leader of a project team. This person
had to do more than just worry about technical specifications, but rather, had to see to it that new changes
were actually implemented. That is, the project manager had to lead a project team that would develop
----------- changes in the way that people in the organization did their business. Thus, the person also had to manage
change.
These additional aspects redefined the role from that of project manager to that of project leader. The
emphasis was then changed to developing a program on the role of project leadership. The program was
aimed not only at the project leader, but also at the other people in the organization who had to appreciate the
new role.
In addition to developing an appreciation of the new role, the development program also had to develop an
appreciation of the use of influence skills rather than reliance on positional authority. In a bureaucratic culture
there is a higher reliance on positional authority, but the increased responsibility of the project leader was not
matched with increased authority. This is usually the norm in project management. Sometimes the project is
identified with a powerful person so the project manager can reference that person and get referent authority.
That is, the project manager can say “the CEO wants this done” and wield authority based on the CEO’s
position. But in general, project leadership requires that the person develop his or her own abilities at
influence and not depend so much on referent power. Therefore, the development program had to impart this
idea in a usable form so the future project leaders would become more self-sufficient, more self-reliant, and
more entrepreneurs than simply project coordinators.
These concepts are easy to talk about but difficult to teach—and maybe more difficult to learn. The project
leadership role can be defined and put on paper, but it is not really meaningful until it is experienced. Thus, it
was imperative that the training program be experiential, so that people could have a better idea of what the
project leadership role would be like in the future. In addition, it was important that others on the project
team, as well as others in the organization, experience what it would be like dealing with the new project
leaders. It was thus decided that a simulation experience, involving all layers of management personnel,
would be the best management development tool.
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Title The simulation was used to give people some experience in a different world. It purposely did not simulate
their current experience as the idea was to get them ready for new organizational expectations. The simulation
experience thus helped to clarify what the role of the project manager would be in the future and gave people
some brief experience in this role. Potential project team members also received benefit as they experienced
the problems of project management from the point of view of the project leader. They thus obtained a better
----------- understanding of what a project leader does and why they do what they do. This allowed them to become
much better and more understanding project team members.
Many organizational change efforts seem to die from a lack of senior management support. That is, people are
trained to practice new behavior, they get excited about the benefits of the new behavior, but then they return
to their departments and find that senior management still expects and rewards the old behavior. When this
happens, the net effect of the management development program is to cause frustration for all concerned.
Thus, effective change strategies require constant interaction and communication between the training
function and senior management to ensure that there is support for the behavior that is being learned.
The senior management at OE worked to ensure this communication and support. To begin, one of the
division presidents sponsored the program and was physically present to introduce most courses and discuss
why they were being offered. This sent a message to course participants that the move toward a project
management culture was serious and supported by senior management.
The development program included a top management review of the perceived impediments to changing
behavior in the organization. People in the development program often saw the benefits in changing behavior
but sometimes felt that there were impediments in the organization, usually assumptions on the part of upper
management that favored old behavior. Each group in the development program thus developed a list of those
behaviors that they felt they could change themselves and those where they felt there were organizational
impediments. These lists of impediments were then collected from the participants and presented to senior
management. The senior management team then worked to remove the impediments and thus helped to
support the change.
Proper project management requires a discipline on the part of project leaders in the areas of planning,
scheduling, and controlling the project, as well as dealing with the myriad of other problems that arise during
the project execution. One aspect that senior managers may sometimes fail to realize is that it requires a
similar discipline on their part. That is, in order effectively to ask subordinates to follow certain procedures,
senior managers must be ready to follow those procedures themselves, or subordinates will not take the
requested changes seriously.
In effect, this means that senior managers must be role models for the changes that they want others to
implement. This requires a number of behaviors on their part. Senior managers must:
• Enforce the role of project plans. Project management requires planning. However, if senior
managers never review the plans, project leaders may not take planning seriously. In addition, project
leaders should know how their project fits into the overall strategic plan for the organization. It is thus
important that upper management work with the project leaders to review their project plans and show
them where the project fits into the overall strategic plan.
• Enforce the core team concept. Project management requires a core team of people that stays with the
project from beginning to end. Most everyone in organizations believes that this is true, but adopting
this approach limits senior managers’ ability to move people at will. Upper management must thus
model the behavior of not moving people off core teams unless there is an extreme emergency. If they
do not adopt this posture, the core team concept will fail.
• Empower the role of project leader. Project management requires that the end-user department takes
responsibility for the project. The project leader needs to be empowered from that user department.
This means that the senior manager from the user department also takes responsibility for all projects in
his or her department.
• Hold postimplementation audits. Project management requires that postimplementation audits be held
to determine if the proposed benefits of the project were indeed realized. In addition, audits should be
used to help members of the organization to develop better project management practices by reviewing
past project experiences. The audit should be seen as a unique chance to learn from experience, and the
results of audits should be reviewed by senior management.
Notes
1. Robert J. Graham, Project Management as if People Mattered (Bala Cynwyd, Penn.: Primavera
Press, 1989).
2. David I. Cleland, Project Management: Strategic Design and Implementation (Blue Ridge Summit,
Penn.: Tab Books, 1990), p. 352.
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Title
Section X
Engineering and Construction Concerns
----------- Chapter 25
Administrator—Engineer Interface: Requirement for
Successful Contract Award
George C. Belev
General Electric Company
The role of the engineer is significant in a build-to-print, specification, or research and development
procurement. It is a role that directly and critically impacts the resultant procurement inclusive of complete
failure of the vendor to provide the necessary supplies or services. The engineer has the ultimate
responsibility for accomplishing the technical work of an organization, whether for internal research or for
external government or other clients. But in fulfilling this responsibility, the engineer cannot and does not
function alone. During some or all of the engineer’s program work, contact with a purchasing administrator is
required—contact that can be characterized by adversariness or alliance. The relationship between contract
administrators and engineers during the early phases of a project exerts a strong influence on the final
product’s quality and cost. The contract administrator’s technical knowledge and people skills play a key role
in the success or failure of this contract administrator-engineer interface.
There are three key elements of the procurement process in which this is particularly true.
1. Development of the initial acquisition strategy and formulation of contracting methodologies
2. Development of the request for proposal
3. Proposal evaluation and order award
Development of the Initial Acquisition Strategy and Formulation of
Contracting Methodologies
This element is perhaps the most important in the procurement process, yet it is the one given the least
attention by engineers. Being detail-oriented, engineers tend to focus on the immediate, giving less emphasis
to the big picture. But the tone and perspective of the entire procurement, as well as its probable success, is a
function of the initial acquisition strategy. It is during this initial stage that the integrated procurement plans,
funding profile, source selection procedure and criteria, and type of contract are established. The engineer’s
involvement in this stage can spell doom or success down the road. If one compares the funding process to
zero-based budgeting, then planning deficiencies or unworkable contracting methodologies can result in a
vulnerability to outside influences attacking the viability and legitimacy of the strategy.
The total program requirement must be developed, understood, time-phased, and communicated by the
engineer to all involved in the procurement process. Proposed hardware deliveries must be realistic,
technically feasible, consistent with the known capability/capacity/certification status of anticipated vendors,
and based on the engineering cost estimate. Data (software) requirements must be delineated, with submittal
timing supporting the overall program and consistent with potential vendors’ process need. Test plans and
procedure, test performance, and data availability must be logically sequenced and support program
schedules. And how the procurement is to be funded must be clearly established. Will the funding be for the
total program or incrementally? Is the funding type (capital equipment, operating, general plant, etc.) and
source (private, government, financed) known and committed? Are contract line item deliverables affected by
the funding source or type?
The integrated procurement plan is not a true technical document and, as such, the engineer must work closely
with the contract administrator in its formulation. The pricing received with the vendor’s proposal reflects the
way that the vendor intends to meet the requirements of the specification. If there is any change in this plan,
the pricing proposed could change. If the engineer is not sensitized to the direct relationship among such
factors as proposal pricing, vendor deliveries, vendor election to detail relative to meeting requirements, and
other programmatic relationships, then the engineer’s overall program can be jeopardized before it begins.
The contract administrator can assist by providing the focus necessary to ensure that there is a clear relation
among the technical work, the sequencing envisioned, the specification developed, the bidding instructions
issued to the prospective vendors, and the engineering cost estimate for the entire program.
The engineer must determine how the vendor will be selected during the procurement process. Often a
selection based upon technical merit, rather than price, is in the best interest of the overall program. In this
case, the engineer must (1) determine the procedures for evaluating vendor proposals (setting up a rating
system and preproposal conference, and making preaward visits to vendor facilities); (2) establish the
evaluation criteria (i.e., go/no go minimum qualification, and relative importance/relative weight definition);
(3) convene a source selection board (entailing member selection, with program requirements clearly and
concisely defined); and (4) obtain approval of the source selection plan and the minimum qualification and
evaluation criteria. The engineer must drive the whole source selection process to ensure closure, selecting the
most technically acceptable proposal, while maintaining the timing of the overall program schedule.
While source selection—resulting in the most technically qualified vendor proposal—seems like a
straightforward activity, it is subject to many potential problems. By definition, the process is subjective. As
such, there is need for greater scrutiny of the review from a procurement standpoint. In the engineer’s search
for the best, most technically qualified proposal, it is often forgotten that the rules of competitive procurement
still apply. The contract administrator must ensure that during the proposal evaluation stage, there is no
change to the evaluation criteria that were originally communicated to the vendors prior to submittal of the
proposals. Thus, the proposal review team must include a member from the contract administration function
to ensure that all proposals are fairly evaluated, using the original criteria, in a manner that will not result in a
protest from an unsuccessful vendor.
Contract Type
The needs of the program, as defined by the technical specification, directly impact the contract type
considered for the procurement. This relationship is not always obvious. In an attempt to control the overall
cost of the program the engineer attempts to get a firm fixed price contract with a vendor. A firm fixed price
contract sets a dollar ceiling that is not related to the vendor’s actual costs expended in performance of the
contract work. However, such an arrangement is not always in the best interest of the engineer and his or her
program. The type and complexity of the requirements, the degree of control over the performance of the
work desired by the engineer, and the confidence that the engineer has in the ability of any vendor to meet the
requirements must all be considered in the selection of contract type as well as in the drafting of the technical
requirements.
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Title The contract administrator makes a critical contribution at this point, since the problems associated with the
wrong type of contract usually do not surface until after the order is placed and administration begins. A
wealth of prior history of contract performance problems associated with the wrong type of contract can be
brought to bear. What must be considered is not only the degree of control desired by the engineer, but how
that control can adversely or negatively impact the contract, shifting the risk of loss or potential for a claim for
----------- additional costs to the engineer. Also, how good are the design and performance requirements contained in the
specifications? The contract administrator must make it clear to the engineer that the engineer warrants that a
model, provided with the specification, meets the requirements of the specification. The engineer warrants the
correctness and reasonableness of the design specification. It is not contractually easy to shift the
responsibility for a bad procurement to the vendor. When a controversy is raised between buyer and seller, the
courts interpret the specifications against those who drafted them.
Nothing can derail a technical program faster than overlooking the critical part that the funding profile plays
in the overall procurement process. Engineers are not accountants and usually do not care what the source of
funds are, as long as there are funds to spend. But this is not always all that needs to be considered. In any
business—commercial or government, internal or external—funding comes from a budget. The amount
contained in the budget has been approved for expenditure in a certain manner. It may be unrestricted, it may
be dedicated (e.g., only for capital or plant equipment, or only for construction), and so on. If the engineer
fails to appreciate the distinction between these various “colors of money,” the program can find itself
unfunded, with little to no time to get the right “color” of funding.
The engineer has a good understanding of the nature of the work contained in the technical specification, and
the contract administrator has a good knowledge of funding sources and the restrictions that often accompany
them. Together, the engineer and contract administrator must reach a mutual understanding on the source of
funds very early in the formulation of the acquisition strategy to permit development of the appropriate
contracting methodology.
Program Control
The degree of program control that the engineer desires must be consistent with the technical specification
and administrative requirements proposed for inclusion in the contract, the procurement regulations governing
program controls, the payment schedules, and the contract type being proposed. Consideration must be given
to how best to structure the purchase order relative to the line item deliverables. This not only provides for the
timely receipt, acceptance, and utilization of the items being procured, it permits the vendor to invoice,
receive payment at reasonable intervals, and maintain a positive cash flow position. Discrete, separate
deliverable items should be described and listed in the purchase order, with acceptance criteria defined for
each deliverable item. The engineer must be sensitive to the financial position of the vendor selected to
perform the work; the fact that a fixed price contract has been placed is of little value if a cash flow problem
forces the vendor into extreme financial difficulty.
The engineer is responsible for monitoring the vendor’s progress during performance of the work, to ensure
that the vendor is on a schedule that is consistent with the delivery requirements of the order and expending
the funds at the rate appropriate to the estimated costs in the order. Often, the vendor is required to submit
cost reports to the engineer, the detail of which is agreed upon prior to placement of the contract.
The more detail that the engineer requires in the cost report, the higher the vendor’s cost to compile and
submit it. The contract administrator can provide the engineer with guidance on the details required in a cost
report and how this information should be used in monitoring the vendor’s cost performance. Often the
contract contains clauses that require the vendor to notify the contract administrator when the cost level is at
(or about to exceed) a certain percentage of the estimated cost of the order. The contract administrator should
encourage the engineer to put in place an informal cost monitoring system, regardless of the contract type
incorporated into the order. As noted above, the fact that a fixed price contract has been placed is of little
value if a cash flow problem forces the vendor into extreme financial difficulty. Measurable milestones should
be established by both the engineer and the contract administrator that serve not only to monitor performance
of the actual work but are used by the contract administrator as “flags” for projecting overruns of the contract
funding.
The vendor list is the place where the engineer can really damage an otherwise good procurement. By
specifying a restricted or limited vendor list, the engineer can limit competition. This can have a negative
effect since the best prices generally can be obtained by full and open competition among qualified vendors.
All vendors capable of performing the work must be given the chance to compete for the work, being advised
of the qualifications that they must ultimately meet. They should not be excluded. The engineer must realize
that by virtue of the way it is written, the technical specification can effectively restrict the vendors. For
example, writing the specification around a specific product, or identifying that the item desired must be
“identical to” a brand name item, is a sure method restricting the vendors. The contract administrator’s review
of the specification should ensure that “brand name or equal” designation contains the minimum, essential,
salient characteristics of the item being procured, thus removing the apparent restriction.
The contract administrator can be of great assistance to the engineer in developing the vendor list. Often the
engineer’s market research has been limited to familiar vendors or those that have provided similar work in
the past. However, the contract administrator is skilled in utilizing sources such as the Thomas Register,
Nuclear News Buyers Guide, and existing and prior purchase order information, which will provide the
engineer with a significantly increased vendor base from which to select the vendor list for the specific
procurement.
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The engineering cost estimate is almost as important as the technical specification in the procurement process,
and the engineer must take its preparation seriously. Initially, the cost estimate is the basis for the funding
request, and it can influence the acquisition strategies, depending upon its magnitude and the actual
----------- availability of funds for this and other programs. During the proposal evaluation process, the cost estimate is
used to establish the negotiation objectives. Finally, it can be used as the basis for award. Government
regulations, for example, permit award based upon a favorable comparison to an engineering cost estimate.
Often, little to no science is put into preparation of the cost estimate, thus making it very difficult to use it for
the establishment of negotiation objectives and as a basis for award. An inadequate cost estimate can cause
the need for repeated requests for additional funds or an overcommitment of funds that could be used
elsewhere.
As the chief negotiator, the contract administrator must have the best information at his or her disposal,
inclusive of the cost estimate. Anything less can (and often does) result in an unacceptable procurement.
Either too high a price is paid and there is inequity between the work performed and its intrinsic value, or too
low a price is paid and the work performed is not what the engineer desires (you often get what you pay for).
In both cases, the procurement is not in the best interest of the engineer, the contract administrator, or the
vendor.
In addition, the cost estimate must be “independent”; that is, it must be arrived at by the engineer in such a
manner as to permit its use as a basis for award. It must be made very clear to the engineer that presolicitation
price discussions with a vendor as a basis for the engineering cost estimate can result in that vendor having an
unfair advantage, since such an estimate is not independent.
Negotiation
Negotiation is often a very exasperating procedure for the engineer. It was bad enough to write and rewrite the
technical specification because the contract administrator required modifications to assure that all bidders
were being treated fairly. Now the engineer is being called upon to defend his or her cost estimate and justify
the technical adequacy and conformance of the vendors’ proposals being evaluated.
Perhaps nowhere else in the process is there more of a need for teamwork and mutual understanding than
during negotiation. Since most manufacturing costs are approximately 50 percent material and 50 percent
labor, it is impossible to effect any meaningful decrease in the price proposed without challenging these items
directly. Without the “smarts” of the engineer to permit meaningful and realistic fact-finding, the best the
contract administrator can hope for is negotiation of labor rates and indirect expense (burden) rates. The result
will be far from the best obtainable and certainly not in the best interest of the client or the engineer’s overall
program.
A careful review by the engineer of the program plan proposed by the vendors is crucial to the success of the
program. Often, the engineer has provided the contract administrator with an unrealistic manufacturing or
performance schedule, since it was developed by fitting the work into the available time span. A vendor, not
wanting to appear unresponsive during proposal evaluation, may indicate without any further elaboration that
it intends to meet contract schedule. The contract administrator must ensure that the overall program plan is
broken down by the vendor into its constituent elements and that the engineer thoroughly evaluates each
element for sequence correctness, realism, and attainability. Elements that must be reviewed include the test
program, material ordering and delivery, document submittals, subcontract placements, and any qualifications
never done before. There is nothing worse for the success of the program on the part of a vendor than to agree
to a schedule that cannot be met, just to receive the work, expecting that something can and will be worked
out later on during contract performance.
Finally, the contract is placed and the work can commence. Can the engineer relax and get about his or her
business, leaving contract administration to the contract administrator? Absolutely not! The proof that there
was meeting of the minds and mutuality as to the work being performed can be demonstrated only during the
actual execution of the contract requirements. Since much of the direction and success of any program takes
place during the early initiation stage, it is highly desirable that the engineer and the contract administrator
visit the vendor’s facility to participate in a kickoff meeting. During this meeting all parties concerned can
review the technical specification and the vendor’s plan for meeting the requirements, as well as discuss plans
for obtaining the necessary materials, subcontract support, qualification of processes/personnel, and the
schedule for documentation submittal. The person loading and machine/facility resource profiles to support
the proposed deliveries and intermediate program steps can also be discussed. Milestones can be developed to
permit the monitoring of the vendor’s progress and its attainment of program objectives. Cost control and
reporting methods and formats should be clearly defined, as well as the content and depth of information to be
provided in any cost reports called for under the contract. Both the engineer/contract administrator and the
vendor should leave the kickoff meeting feeling that there are no obvious misunderstandings, that trust is
developing, that the program can be successfully completed, and that there is nothing that is left to the
imagination of either party. Now, the work can begin!
Conclusion
Since the contract administrator is usually given the responsibility of ensuring vendor conformance to
contract requirements, it is necessary for the contract administrator and the engineer to develop a partnership
beginning with development of the initial acquisition strategy and formulation of the contracting
methodologies through order placement. A successful contract administrator-engineer interface exerts a strong
influence on the finished product’s quality cost, and delivery. An unsuccessful relationship, on the other hand,
can seriously jeopardize the acquisition process and result in the failure of the total program.
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 26
Managing to Avoid Claims: A Design Engineering
-----------
Perspective
Irving M. Fogel
Fogel & Associates, Inc.
Design professionals are spending more of their time and money—and their insurance carriers’
money—defending themselves against claims being made by owners, contractors, casual passersby, and
third-party users such as passengers in elevators and tenant employees. Usually, the design professional’s
exposure to losing when defending against these claims results from something other than technical failure. It
results instead from the failure to manage properly. The design professionals fail to manage or administer
their efforts properly during the predesign and design process, they fail to manage and administer their work
properly during the bidding process, they fail to manage and administer their responsibilities properly during
the construction phase, and/or they fail to manage and administer properly the postconstruction or closeout
phase of the project.
Design professionals think of themselves as professionals skilled in the application of aesthetic, functional,
and scientific principles to achieve pleasing and practical results. They often lose sight of the fact that in the
process, they must manage contracts in order to try to avoid claims and to be prepared to defend themselves if
and when claims are made against them. A claim or lawsuit resulting from the failure to manage or administer
properly is no less grievous than one resulting from a design error. The design professionals must never forget
that they are also contract managers—managers of contracts with clients, consultants, and others. The
management and administration of the contracts is no less important than the management and administration
of and performance of the design and, where they act as construction administrators, the management and
administration of the construction process to ensure the successful completion of the project.
The design professionals’ contracts usually define the phases of a project as the study and report phase, the
preliminary design phase, the bidding or negotiating phase, and the construction phase. For administrative and
management purposes, there is also a preprofessional service contract phase.
The Phases of a Project
The Preprofessional Service Contract Phase
Although no services are being performed as yet, the foundation for many disputes is often laid during the
preprofessional service contract phase of the project because of poor communication and the lack of proper
documentation. The contract usually includes language outlining and limiting the scope of services and
responsibilities. It also contains provisions for the arbitration of claims and disputes that arise from
differences in the interpretation of the language. We must try to eliminate the need for activating the
provisions on dispute resolution.
In order to avoid the costs that result from arguing over what is meant by the contract, the professionals must
try to communicate as clearly as possible during the negotiation phase what they intend to do and what they
intend not to do. In addition to communicating, they must also document their understanding of their scope of
services document with the same care that they devote to their design calculations. Too often, people honestly
believe they hear what they would like to hear, when in truth something else is promised. The contract can’t
cover everything, and professionals have certain responsibilities that are never covered or eliminated by
contract.
Again, during the study and design phases, “consultation with the owner” is a major consideration. To avoid
disputes, we must consult, communicate, and document.
Agreements with consultants must detail, in writing, the duties and responsibilities of the parties. The work
performed by consultants must be reviewed for conformance with the agreements. Lines of communication
must be established so that all concerned are kept informed of changes and/or other facts that may affect their
work.
During these phases, as a result of the development of the design, factors affecting the cost of the project must
be communicated to the owners to allow them the privilege of determining, in advance, if and how their
money will be spent. Letting the owners decide in advance whether they want to pay for something and
properly documenting the decisions or agreements reached can help prevent the oft-heard argument, “If I
would’ve known, I wouldn’t have gone ahead with it or I would’ve done something different.”
Design professionals regularly rely on representations made by others who are “supposed” to know. The
design professional has a responsibility to document the representations and at least check whether the oral
representations made are in conformance with the published literature. Many disputes result from the
acceptance of oral representations that are contrary to the literature published by the organization being
represented.
The professionals responsible to the client for the total package have the responsibility for coordinating their
work and that of all consultants. This responsibility must be diligently managed and administered. “My
consultant made a mistake” may be a valid defense. You don’t, however, want to get to the point where you
have to defend yourself. The cost of a defense and vindication may ultimately be greater than paying without
defending.
Standard specifications are truly standard. They are, however, neither all-inclusive nor valid for all projects.
They must be checked and conformed to the particular project for which they are intended, and the drawings
and specifications must be conformed to eliminate conflicts.
The design professional usually has the responsibility to advise the client of any changes in the original cost
estimate for the project. A procedure must be established to track the estimated cost of construction as it
relates to the originally established construction budget. This tracking process can also help determine
conformance with the original concept: overdesign or, possibly, underdesign. In either case or in neither case,
the relationship between the current estimated cost of construction and the preliminary estimate will be
known.
Many design professionals believe they can relax once the bid package is complete and that there really isn’t
much to do until construction starts. This is not true. They have many responsibilities during this phase of the
project, most of which are basically managerial or administrative.
There are differences between contracts that are let by competitive bidding and those awarded as a result of
negotiation. It is not true, however, that the services during the bidding phase of a publicly bid contract that
nominally will be awarded to the lowest responsible responsive bidder are strictly of a pro forma nature. At a
later date, many things can either come back to haunt or protect us: conducting prebid meetings, conducting
prebid site conferences, answering questions, provisionally approving substitutions, and recording what is
done and what is said by the proper issuance of addenda, or the lack thereof.
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Title The design professionals are usually required to assist the owner in evaluating bids or proposals. When
analyzing a bid, the professionals must verify that all the conditions are met and that all the documents
required to be submitted have been submitted. Before certifying that a contractor is “capable” or “competent,”
you as the professional must verify that the contractor is, in fact, whatever it is you are certifying, and you
must document what you did to satisfy yourself. When you certify that a bid is “reasonable,” you may be
----------- taking on a lot more responsibility than you wish. Remember that a bid is based on an estimate, and an
estimate, by definition, is an estimate. There is at least one instance where in support of the validity of his
“excess” costs or damages, one of the contractor’s major arguments was based on the fact that the engineer
had “verified” the estimate as valid and all-inclusive.
The professional’s responsibilities during the construction phase of a project are more subject to interpretation
than his or her duties and responsibilities during any other phase of the project. This is truly the phase during
which the perceived responsibilities may be greater than the actual. Also, paraphrasing an attorney discussing
the subject, “if you have the right, you have the duty.”
During this phase of the project, in addition to the responsibility for coordinating with his or her own
consultants and client, the design professional may have the responsibility for dealing with the constructor.
There may be additional managerial and administrative responsibilities relating to other consultants, to
inspecting organizations, and to testing laboratories that have been contracted with directly by the client.
In addition to the engineering competence required to judge technical compliance with the contract, to review
shop drawings, to review schedules, and to review proposals for substitutions and/or modifications, the design
professional may have both technical and administrative responsibilities relating to the contractors’
applications for payment and change orders. In addition, depending on contract and/or perception, the design
professional may have many other rights, responsibilities, and duties that require management.
Although contracts do not usually identify a closeout phase, per se, it’s a distinct phase requiring its own
management. Before certifying completion—by whatever title—in addition to the “punch list” efforts that
may be required, the professional must assure that all the administrative aspects of finalizing the contract are
met. This includes but is not limited to filing certificates with governmental agencies; issuing certificates to
the contractor or contractors; verifying “as-builts”; ensuring that all the operating manuals and warranties that
are called for are in fact received; and documenting that all the contractual responsibilities have been
complied with.
Claims Prevention
Most management failures result from errors of omission and not errors of commission. One of the simplest
and yet most efficient ways to minimize the probability of missing something is to prepare a checklist for
each project, no matter how small. The checklist can be based on a generic list used by the engineer for all
projects, but the list must be modified to include the requirements of that specific project.
Since most claims arise as a result of errors of omission on the part of the professional, a good place to start is
to follow through on each of the following action items:
• Check drawings for proper coordination between technical specialties.
• Check to see that the information on the drawings conforms to the written word of the specifications.
• Read the boilerplate language to see that it conforms, specifically and uniquely, to the project under
consideration.
• Enter into written agreement with consultants detailing exactly what their responsibilities are.
• Review the work performed by consultants for conformance with agreements.
• Check the finalized program against the estimate or budget to determine the current validity.
• Communicate properly with consultants so that a change wrought by one that affects the work of
another is properly accounted for.
• Include owners in the communications process to permit them the privilege of determining, in
advance, how their money will be spent.
• Establish a reasonable time frame for review.
• Establish reasonable durations for implementation.
• Specify scheduling using one of the many available network scheduling techniques.
• Review the specifications to determine whether items specified are still available (or, for that matter,
whether they have been available for the past X number of years).
• Check whether the information given by a sales representative or sales engineer is valid or in
conformance with the specifications sheet prepared by the very company he or she represents.
• Check the bids, quotations, or proposals for conformance with the contract documents.
• Review the insurance requirements of the contract documents to assure compliance.
• Review the schedule carefully, and react in a properly and timely manner.
• Establish and adhere to an orderly system of controlling or keeping track of the documentation.
• Retain the backup information or supporting data for the approval, modification, or rejection or
payment requests.
• React in a timely manner to requests for clarification or interpretation of the project documents.
• Monitor the progress of the project and report objectively to the owner as required.
• Take responsibility for discrepancies and/or omissions in the project documents.
• Issue clarifications and instructions in a timely fashion.
Reacting to a Claim
If confronted with a claim, management reaction must be prompt and positive. Attorneys and insurance
carriers must be notified and assisted, without reservation, in mounting a defense. Delay in mobilizing both
information and resources for contesting the claim results in weakening the defendent’s position, even in
relationship to unfounded claims.
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Chapter 27
Construction Claims: Entitlement and Damages
----------- A J. Werderitsch
Administrative Controls Management, Inc.
Joseph S. Reams
Administrative Controls Management, Inc.
Construction claims present a sad but real dilemma for the construction industry. Claims establish an
“us-versus-them” attitude when what is required is a team approach to accomplish a project. Finger-pointing
accusations from unknowledgeable and uninvolved owners, above-it-all architects and engineers, and
underhanded contractors continue to cast a pall over complex, technological projects. Lessons learned often
end in an attempted one-sided contractual arrangement rather than a solution to the root causes of claims.
Construction claims are a reality; as such, each new project must be prepared for the eventuality of a claim.
Reports and other project documentation, which in the past have represented management practices, are now
being prepared with an eye to building cases. The stakes are high; change orders anticipated to total 5 percent
of contracts may now be influenced by alleged claims ranging from 30 percent to 100 percent of the contract
amount.
Delay and acceleration are complex issues from an entitlement determination and cost quantification
viewpoint. This chapter presents a review of items to be considered in the cause-and-effect relationship of
delay and acceleration. The chapter is intended to provoke additional questions and provide a basis for
solutions for readers faced with the possibility of preparing or defending against claims for delay and
acceleration.
Background
The contract documents are the foundation of construction claims analyses that focus on establishing
entitlement and proving damages. Construction contracts generally contain certain clauses to facilitate the
execution of changes to the intended scope of work. These clauses define the responsibilities of the parties,
allow for changes to the work, provide for time extensions, define the methods for pricing the changes,
provide for contract termination (convenience to the owner or default by the contractor), and stipulate the
means of resolution.
The contract documents may be the source of major disputes centering on the impossibility of the
specifications. Constructive changes during the execution of the work often result in claims. These claims
may result from contradictory or ambiguous language and specifications, errors or omissions, or work that is
impossible to perform according to the documents. In the case of obvious errors, it has been found that the
contractor bidding the work has the responsibility to call the error to the attention of the owner.
Other issues resulting in claims include disputed change orders, differing site conditions, apparent authority,
and overzealous or improper inspections. Construction claims result from misinterpretation and improper
administration of the contract documents during project implementation. They also occur because of
misunderstandings concerning the rights and responsibilities of parties to the contract. This often leads to the
waiving of one's rights as provided for by the contract.
The most difficult issues to resolve in construction claims are those associated with delay and acceleration.
They are difficult to resolve because they usually involve several complex issues. Adding to this complexity
is the assessment of whether an issue is excusable or nonexcusable. Further complicating this assessment is
whether an issue occurs independently, concurrently, or as a serial result of one or a combination of excusable
or nonexcusable issues. For example, an entitlement analysis of the total delay may result in the finding that
the delay was partially excusable and partially compensable. In this case, only a part of alleged time and
compensation requested by the contractor would be warranted. The issues may sometimes be so complex that
separate hearings are convened first to determine entitlement and then, based on finding entitlement, to
determine the damages.
In the event of a delay, to establish entitlement to time extensions and delay damages, it must be proved that
the delay impacted the contract completion date. The cause-and-effect relationship must be identified,
quantified, and supported by contemporaneous documentation.
Having established entitlement, alleged damages must be proved. Actual damages supported by project
records are the best substantiation. For example, liquidated damages must be shown to represent an estimate
of the owner's anticipated damages, or these damages may be interpreted as a penalty and not enforceable.
Actual owner damages must be supported by proper documentation. Contractor's delay damages--such as
field indirect costs, general conditions, home office, and administrative expenses--must be itemized and
documented. Damages associated with inefficiencies resulting from impact, such as work resequencing and
stacking of trades, must be supported. Industry data studies may be used; however, contemporaneous project
records identifying project conditions and realized productivity are superior documents.
As-planned and as-built schedules are also used to assess inefficiencies. These schedules are also used to
analyze entitlement and calculate the number of days for the assessment of either owner or contractor delay
damages.
The purpose of the following discussion is to present basic principles regarding entitlement and damages for
delay issues. A basic familiarity with these principles will allow contract parties to understand their own as
well as the other party's positions. Understanding the complexities provides an incentive for the parties to
resolve their differences equitably without going to court.
The comments presented are based on the assumption that a lump sum contract for general contractor work
exists and that the contract contains standard clauses for addressing changes, differing site conditions, time
extensions, and liquidated damages. It is also assumed that time is of the essence and that there is no
no-damage-for-delay clause.
Entitlement
Entitlement to contract time or sum adjustments resulting from delay is usually found in the contract clause
pertaining to time extensions. Most clauses provide for a time extension if the cause of the delay is
attributable to actions or inactions beyond the control of the contractor. Labor strikes, severe weather, acts of
God, and delays to the work within the control of the owner are generally items considered for time
adjustments. The changes clause may also address time extensions by specifying that the contract time be
adjusted as a result of change orders.
A direct relationship must be established between the change, the delay, and the contract completion date.
When this relationship becomes difficult to establish or is nonexistent, a dispute arises that often results in a
delay claim. The dispute becomes more difficult to resolve when several delay issues are present.
It is also necessary to determine the cause of the delay when analyzing delay entitlement. The cause is defined
as an issue and must be supported by contemporaneous documents. The treatment and classification of these
delay issues are generally not defined in the contract documents. By treatment, it is meant whether the
contractor is entitled to a time extension and no compensation, to a time extension plus compensation, or to
neither. Delay issues are generally classified as follows:
• Excusable compensable delay. This delay is within the control of the owner and provides for a
contract time extension and compensation to the contractor.
• Excusable noncompensable delay. This delay is beyond the control of the owner and the contractor.
The treatment provides for a contract time extension. However, the contractor is not entitled to
compensation, and the owner is precluded from assessing delay damages for this time period.
• Nonexcusable delay. This delay is within the control of the contractor. The contractor is not entitled
to a time extension or compensation. If the contract completion date is exceeded, the owner's liquidated
or actual damages are assessed against the contractor.
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Title Classifying delays is not as simple as applying the above definitions. The delay may be such that the owner
and the contractor are each responsible for delaying different activities during the same or overlapping time
periods. Both of these activities may be critical to the completion of the project. The overlapping delay period
is treated as excusable noncompensable and is considered a concurrent delay. A time extension may be
granted, but not compensation.
-----------
The same applies when an excusable compensable delay is concurrent or overlaps with an excusable
noncompensable delay. For example, if the resolution of a differing site condition (excusable compensable) is
concurrent with a labor strike (excusable noncompensable), time extensions would be granted to the
contractor only for the period of time these two issues concurrently delayed the project.
Complexities in resolving delay entitlement are further increased when the serial effect of a delay is
considered. For example, if work that was planned to be completed before a strike is actually performed after
the strike as a result of an earlier excusable compensable delay, the delay resulting from the strike could be
argued as compensable. If the work in question was delayed by an earlier nonexcusable delay, the argument
that the contractor is not entitled to a time extension would exist.
Establishing Entitlement
Entitlement analysis is usually based on the identification and quantification of excusable delay issues. The
reason for this apparently one-sided approach is that project documentation is fairly consistent between both
the owner and contractor regarding an excusable delay. The project impact associated with an excusable delay
can be quantified.
It must be determined, however, whether a nonexcusable delay is concurrent with an excusable delay or by
itself impacted the contract completion date. This step may have a tremendous effect on the outcome of a
delay analysis.
Generally, once identifiable delays have been quantified, the difference between the resulting adjusted
contract completion date and the actual contract completion date is viewed as a nonexcusable delay.
Project Documentation
Contemporaneous project documentation is used to identify and assist in quantifying delays. Project
documentation includes, among other documents, the contract bid documents, correspondence, meeting
minutes, daily reports, photographs, change orders, field orders, bulletins, submittal logs, payrolls, and cost
and accounting records. Interviews with key project personnel provide direction in identifying which project
events and activities to focus upon.
Potential delay issues are identified from these interviews and the documentation review. Chronologies for
these issues must be prepared. They concentrate on activities occurring prior to, during, and after the time
period at issue. Analyses of the project's planned and actual activities, including the delay issues, are used to
quantify the project impact.
Documenting and proving impact to the contract completion date are critical to supporting entitlement to time
extensions. This documentation and proof require cause-and-effect analysis. Using prepared project
documents and issue chronologies, a schedule delay analysis is performed. The party having a thoroughly
researched and documented position is more likely to prevail in seeking or refuting entitlement.
Generally, one of the primary requirements for entitlement is written notice. The notification requirement
provides the notified party with the opportunity to review the condition and take action to resolve or mitigate
its impact. In the absence of formal notification, project documentation may be the source to prove knowledge
of the issue, thus waiving the written notification requirement.
Documents such as meeting minutes, internal memorandums, and daily job records may provide the proof that
both parties were aware of and working toward mitigating the delay.
A suggested presentation of an entitlement position includes a brief description of the contract scope of work,
a summary of the breached contract clauses, and discussion of the issue or issues in dispute. Each issue is
developed in a clear and concise chronology of the events. Both parties' positions should be defined from the
project chronology. Positions should provide references to specific actions or inactions resulting in impact to
the contract completion date. This impact must further show that material damage was incurred. Damages
should be treated separately and supported by the entitlement position.
Damages
Damages for delay, like entitlement, include many complex items which in themselves may be the subject of
dispute. It is also important to understand the theories of damage recovery that have in several instances been
upheld by the courts. The following discussion addresses both owner's and contractor's damages.
Owner's Damages
The contract documents formulate the basis for the recovery of damages. Owner's damages regarding delay
may be specified in the agreement or contract form. Frequently, owner's damages are defined as liquidated
damages and are assessed against the contractor for each day the contractor finishes beyond the contract
completion date. In lieu of liquidated damages, actual damages may be stipulated and include special damage
considerations.
Generally, if the contract documents stipulate liquidated damages, they cannot contain a provision to seek
recovery of actual or other consequential damages. An exception may occur when specific limitations have
been placed on the limits of the liquidated damage clause as to what damages are specifically included and
what damages are specifically excluded in the clause.
Liquidated damages are defined as an agreed-upon amount of dollars, usually represented as a daily amount.
The amount represents the estimated cost to the owner of not having the contract completed on time.
Stipulating the amount of predetermined liquidated damages in the bidding process minimizes an additional
item to be disputed.
It is important that the amount of liquidated damages represents a reasonable attempt at estimating the real
damages. To be valid and enforceable, the estimate must be prepared at the time of contract execution and
represent foreseeable damages. For example, a list should be prepared for the estimate, including the expense
to continue with resident engineering and inspection services; contract administration services; anticipated
loss of revenue; temporary rental facilities; differential costs for utilities, maintenance, security, and
financing; and other damages that would be incurred if the contract completion date is not met.
The owner attempting to assess liquidated damages who is the cause of the delay in whole or in part will find
that its assessment will not be upheld. The assessment period must exclude all delay attributable to excusable
issues resulting in an amended contract completion date.
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Title Generally, the assessment period ends when the project is substantially complete, unless stated otherwise.
Substantial completion--the point at which the facility is sufficiently complete so the owner can occupy or
utilize the work for its intended purposes--is usually chosen, because it is often difficult to determine when
the project is 100 percent complete.
----------- Liquidated damages may not be enforceable if it is proved that the owner did not suffer actual damages
because of the delay. The same principle applies to liquidated damages that have been set too high.
Clauses providing for actual damages to be paid to the owner require the owner to itemize and substantiate its
claim for such damages. The itemization and substantiation includes providing records of the costs that were
incurred as a result of the delay. Because of the difficulty in identifying, itemizing, and substantiating these
costs plus their being the subject of additional disputes, the liquidated damages provision is more often used.
Contractor's Damages
Allowable contractor damages for delay are usually not specified in the contract. Contract change clauses
provide for the direct cost associated with the change. Contract time extensions may provide for sum
adjustments, but the specific inclusions for these sum adjustments are not defined.
Contractors seeking recovery for delay damages may include impact costs such as loss of efficiency and
extended general conditions. Efficiency losses are the result of work disruptions, resequencing and stacking of
trades, and performing work in weather and other unanticipated conditions. General condition costs claimed
for the delay period include extended site supervision, management, construction equipment, site offices,
change houses, fabrication facilities, and monthly site operating costs such as utilities, cleanup, maintenance,
and similar items. Reimbursement may also be sought for contractor general office overheads and
administration expenses for the delay period.
Generally, the claim to these damages is presented in one of two ways: (1) total cost, or (2) an itemization of
specific costs including impact. The total cost position is one of comparing the bid or estimate amount to the
total contract cost incurred. The total cost claim is usually not upheld by courts because it does not take into
account inherent inefficiencies attributable to the contractor. Additionally, the total cost position does not
quantify the delay issues. It is usually based on the premise that the total delay period was excusable and
compensable.
Seeking recovery of damages by identifying specific cause-and-effect relationships requires a greater effort by
the contractor but provides a firm basis for the contractor to argue the merits of its claim. By developing this
itemization, the contractor is in a better position to support its claim and the owner is in a better position to
review its merits. This is important if the primary objective is one of resolution and equity.
To recover the costs of lost labor efficiency requires the contractor to: establish the progress it expected to
achieve with its use of anticipated resources; substantiate the cost required to achieve the actual progress; and
prove that the increase in costs is related to a compensable delay issue. This effort requires the contractor to
develop and use schedules of its work plan including relationships, durations, and anticipated resource
requirements. In addition, the contractor must keep records depicting the actual progress and impact of the
delays.
Several industry trade studies have been prepared to quantify efficiency losses. These have addressed losses
resulting from significant numbers of change orders, adverse weather conditions, overtime, multiple shifting,
and other project conditions affecting productivity. These studies must be viewed in the context of how they
apply to the specific issues being disputed.
A more effective approach to establishing the extent of efficiency losses is to show what productivity was
realized on the project during periods of no disruptions or other impacts. This is then compared with the
productivity realized during the period in dispute.
Other specific costs associated with efficiency losses, such as the utilization of additional foremen to direct
crafts and supervision to coordinate activities, must also be itemized.
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Title The contractor must also substantiate its damage claim for extended general conditions. This includes the
itemization of site management and office personnel and other expenses required during each delay period.
This should not reflect the peak contract period but should represent the delay period. If this period cannot be
isolated, it may be necessary to determine the costs for general conditions for the project duration and use an
average daily rate.
-----------
The contractor may also be entitled to seek recovery for its office overhead and administrative expenses. The
theory applied in this situation is that during a work suspension that resulted in a delay period, the contractor
was required to maintain its overhead expenses while not receiving expected contract revenue. This is viewed
as an unabsorbed overhead during times of work suspension. The theory has been applied to delay periods as
well as suspension periods. This consideration for overhead and administrative expense is the subject of
recent court rulings, and the outcome has varied.
One method used in allocating this overhead cost is known as the Eichleay formula. The formula assumes that
overheads are fixed and evenly distributed during the course of the contractor's operations and provides for
the computation of a daily amount of overhead for the project delay period.
Acceleration
Claims for acceleration can be classified into two types: (1) actual acceleration, and (2) constructive
acceleration. Actual acceleration is experienced when the contractor is directed by the owner to complete the
work earlier than the contract completion date. Constructive acceleration exists when: (1) a delay existed that
was excusable and warrants a time extension; (2) the time extension request was refused by the owner; (3) the
contractor performs in an accelerated method as a result of the owner requiring such; and (4) the contractor
incurs additional costs as a result of accelerating its work.
The entitlement to acceleration costs is dependent upon which party was responsible for the project delay at
the time acceleration is required or directed. For example, if it is determined that the contract completion date
will not be met, the owner may direct the contractor to accelerate its work and meet the contract completion
date. If the owner is responsible for the delay resulting in the completion date not being met, then the
acceleration is viewed as compensable to the contractor. If, on the other hand, the contractor has caused delay
to the contract completion date and the owner then directs the contractor to accelerate its work, the costs
associated with the acceleration are against the contractor.
The costs of acceleration may include premium pay such as shift differential and overtime, added foremen
and supervision, loss of efficiency, and other costs for equipment and administration. The proof of these costs
is also a requirement for recoverability and includes certified payrolls and identification of added supervision
and expenses.
The issue of acceleration entitlement is similar to the analysis of the delay issues. It is a cause-and-effect
study to determine whether it is excusable or nonexcusable.
References
Hohns, H. M., et al. Deskbook of Construction Contract Law. Englewood Cliffs, N.J.: Prentice-Hall,
1981.
Lambert, J. D., and L. White. Handbook of Modern Construction Law. Englewood Cliffs, N.J.:
Prentice-Hall, 1981.
Levin, P. Claims and Changes. Silver Springs, Md.: Construction Industry Press, 1981.
McDonald, P. R., and R. Lamb. The Mechanical Contractors Handbook of Claim Avoidance and
Management. Reston, Va.: Reston Publishing, 1986.
Nixon, M. A. “Legal Rights.” Project Management Journal 18, No. 1 (March 1987): 22-25.
Rubin, R. A., et al. Construction Claims. New York: Van Nostrand Reinhold, 1983.
Simon, M. S. Construction Law: Claims and Liabilities. Butler, N.J.: Arlyse Enterprises, 1989.
Stokes, M. Construction Law in Contractors' Language. New York: McGraw-Hill, 1977.
Sweet, J. Legal Aspects of Architecture, Engineering and the Construction Process. St. Paul, Minn.:
West Publishing, 1985.
Werderitsch, A. J. Construction Disputes: A Negotiated Resolution. Morgantown, W. Va.: AACE
Transactions, 1986.
Werderitsch, A. J. “Delay Analysis--An Automated Approach.” 1987 Proceedings of the Project
Management Institute. Drexel Hill, Penn.: PMI.
Werderitsch, A. J., and S. Firoozi. Construction Delay Claims--Assessment Defense. Morgantown, W.
Va.: AACE Transactions, 1983.
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AMA Handbook of Project Management, The
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ISBN: 0814401066 Pub Date: 01/01/93
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Title
Section XI
Information Systems and Software Project
----------- Chapter 28
Managing Software Projects: Unique Problems and
Requirements
William H. Roetzheim
Booz-Allen and Hamilton, Inc.
As senior project manager for Tetra Tech Services (a Honeywell subsidiary), I specialized in managing
software development projects. During an airline flight, I enjoyed a lively debate with a project manager
specializing in power plant construction. He was convinced, in his words, that “project management is project
management, no matter what the specific nature of the project.” I argued the point (and, I think, won) that
software management really was different, especially in the area of project planning. I thought it might be
worthwhile to use my notes from the flight (scrawled on an airline napkin) to argue this case in a more public
forum.
Software projects are unfortunate in that a relatively significant amount of the project work (perhaps 30
percent) involves deciding what to do. I’m not referring to subtle points of implementation, but major design
decisions on a par with “Should we have the power plant burn oil or use nuclear reactors?” Imagine being
required to come up with a detailed task list before this decision was made. Experienced software project
managers solve this dilemma by preparing three task decompositions:
1. The concept-oriented decomposition provides a rough, largely generic outline of project
requirements and is used for ballpark estimates and schedules (perhaps plus or minus 50 percent).
2. The capability-oriented decomposition is prepared after analysis is complete and describes delivery
of functionality to the customer, but it makes no attempt to describe how this functionality will be
achieved. Time and budget estimates at this point are normally valid within approximately plus or
minus 25 percent.
3. Finally, the implementation-oriented decomposition is prepared after the software design is fairly
well advanced. For the first time, the project manager knows how the project will be accomplished, and
tasks will have some correlation with deliverable items (software modules). It is only at this point that
close estimates of time and budget are possible.
Another significant difference is that it is difficult to measure completion of tasks. You know when a building
foundation has been poured and can mark that task as complete with some confidence. But software project
managers never really know when most tasks are complete. Even a module that is marked as complete can
(and often does) still require additional work to correct hidden defects, allow it to integrate with other
modules, or meet clarified/modified requirements.
Somewhat related is the fact that actually building the software (coding) is a relatively small percent of the
project effort—perhaps 10 to 15 percent. The bulk of the effort and difficulty comes from testing the
“completed” modules and trying to put them together (integration). Worse yet, the very nature of testing and
integration tends to push them to the later stages of the project, when schedule/cost changes are difficult and
time is short.
Finally, the scope of software tasks varies widely with interpretation. I can literally meet the exact same set of
requirements with software whose costs and complexity vary by a factor of ten. The bulk of software costs are
used to add capabilities that are difficult to quantify and measure such as user friendliness, quality, and
exception handling (which involves anticipating and coding for unusual situations).
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In my experience, software dependencies are always of the partial-finish-to-start variety. This type of
dependency relation says that “Task A must be XX percent complete prior to the start of Task B,” with XX
varying from 0 to 100. Note that if we substitute 100 for XX, we have a traditional finish-to-start dependency.
----------- For most software tasks, the proper number for XX is between 25 percent and 75 percent. This aspect of the
dependency definitions obviously complicates defining the dependencies and discourages their use.
Software dependencies are also uniquely characterized by a degree of rigidity. Very few software
dependencies are rigid requirements (“Task A must be done before Task B”). More often, they are preferences
(“It is more economical to do Task A before Task B,” or “The customer would prefer that we do Task A
before Task B”). These dependency relations can neither be ignored nor dogmatically followed if the project
is to be successful.
Perhaps most important of all, software dependencies do not generally arise from the physical nature of the
tasks. Instead, they originate within the people doing the work and the problem being solved. Each person
working on a project has unique talents and limitations, implying task dependencies in the scheduling of tasks
so that the right person can work on a particular task. Similarly, the unique characteristics of the problem
being solved often drive the sequence in which tasks should be completed in order to support partial
deliveries, prototyping of key areas, risk reduction, etc.
In the end, most software project managers (1) do not attempt to do formal dependency definitions, (2) do the
definitions at a sufficiently high level that they are both correct and useless, or (3) do the definitions once to
meet a customer or company requirement, and then ignore them.
I believe that when compared to other projects, the process of estimating resource requirements for software
projects is totally different and much more difficult. Perhaps the single most important reason for this
difference is that software costs are nonlinear while other project costs are roughly linear. For example, let’s
suppose that a particular type of building costs $50 per foot to build. This number can then be used to estimate
the cost to build a 10,000-square foot building, a 100,000-square foot building, or a 1,000,000-square foot
building simply by multiplying the number of square feet by the cost per square foot ($500,000, $5 million, or
$50 million).
For software, the relationship between cost and “size” is not nearly so simple. The cost per line of software
grows roughly linearly as long as the same number of people can do the work (i.e., going from 100 lines of
code to 1,000 lines of code), but it makes nonlinear jumps as you must add new project personnel. This
nonlinearity (and lack of predictability) results because the bulk of the cost for large software programs can
really be attributed to communications costs among the project participants.
There are other factors that contribute to the unique nature of software resource estimation.
• Software requirements and related factors (the target computer, for example) are often changed
during the project, with accompanying wide variances in resource estimates.
• As mentioned earlier, software costs are largely driven by hidden factors such as quality.
• Project scope, and hence costs, are only really known relatively late in the project.
• Software project managers have very limited long-term historical information to assist them in
preparing resource estimates.
• Software productivity varies widely, often by a factor of ten or more, from one individual (or one
team) to the next.
Although the resource estimation picture painted thus far sounds rather bleak for the software project
managers, we do have one ace in the hole. The vague and changing nature of the requirements combined with
the inherent flexibility of software are ideally suited to a “design-to-cost” mentality. Successful software
project managers invariably ask (or otherwise determine) how much the customer wants to spend, then tailor
the entire development process around that figure.
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I’ve already claimed that risk analysis is significantly more important to software project managers than to
other project managers. The reason is obvious when you examine the nature of software. Every software
project is doing something new and different. If the project was the same as an earlier project, you would just
----------- use the code you developed earlier! Furthermore, most software projects of any consequences are pushing the
state of the art in at least one area. This is an inevitable result of the relative newness and rapid pace of
advance of our science. State-of-the-art development always involves significant risks that must be dealt with,
and software is no exception. Software project managers who downplay risk analysis soon disappear when
one of their projects fails to deliver anything useful at all.
Successful software project managers look not only at projectwide risk areas, but they also perform a risk
analysis for each task in the work breakdown structure. This task-level risk analysis is used for risk avoidance
(e.g., prototyping risky tasks, assigning top talent to the more risky tasks) and contingency planning (e.g.,
scheduling risky tasks early to allow recovery time, budgeting additional funds for high-risk tasks, developing
strategies to replace/redesign risky components). Software project managers often estimate and report on five
distinct types of risk for each task.
1. Technical risk. Failure to complete the task to a required degree of technical excellence
2. Schedule risk. Failure to complete the task within the estimated time
3. Cost risk. Failure to complete the task within the estimated cost
4. Network risk. Risk related to the dependency network linking various project tasks
5. Overall risk. A composite of all risk factors
For each of these five risk factors, the project manager looks at both the likelihood of failure and the
consequence of failure. Obviously, tasks with a high likelihood of failure and a high consequence of failure
are the most worrisome.
If a detailed and accurate software schedule is maintained during a project (which is often not the case), it is
only possible with continual revisions to the initial schedule. Simplicity in changing the schedule is
paramount in any scheduling technique used. One factor that contributes significantly to this is the fact that
developments later in the project often necessitate the addition of new tasks and/or cause tasks that were
completed earlier to become “uncompleted.”
One additional difference between software scheduling and other project scheduling is the close
interdependency between scheduling and costing experienced by software project managers. More than any
other, single factor, software costs for a given project are driven by the project schedule. A project that is
initially scheduled to take four years can be accelerated to three years (or additional requirements can be
added to achieve the same type of schedule compression even with the original four-year deadline). Some
researchers estimate that software costs increase with project schedule compression as an inverse to the fourth
power relationship! For example, there is some evidence that cutting a schedule in half (or doubling the
delivered functionality without increasing the schedule) doesn’t double the cost, but rather increases it by a
factor of sixteen.
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Title
Chapter 29
Implementing Project Management in Large-Scale
-----------
Information-Technology Projects
Rainer A. Otto
Southern California Gas Company
Jasjit S. Dhillon
Decision Management Associates
Thomas P. Watkins
Decision Management Associates
Project management is receiving more attention and emphasis in information systems (IS) departments. IS
projects are becoming more challenging to deliver on time, within budget, and with the functionality desired
by the user. Their high cost poses a great deal of financial risk to the company if they are not managed
properly. This is being caused by business and technology trends that are increasing the importance of IS
projects to the success of the company. Thus, IS departments are recognizing that project management can
help lead to improved project success as it has in other industries such as construction and aerospace.
For the most part, these were batch, paper-oriented systems which, while challenging projects, were generally
accomplished with more informal project management approaches.
The need for companies to become more competitive through increased sales or controlling costs has
precipitated a rise in the need to share data among departments. Thus, new systems need to serve the
requirements of multiple departments and divisions. For example, a marketing department needs timely
access to the customer order department’s detailed information on customers, as well as product sales
information in order to better target sales and new product development efforts. To reduce costs and material
order lead times, all departments require access to new purchasing systems to submit purchase requisitions
and obtain status information. Often this means that the new system must satisfy competing and sometimes
conflicting needs and involve many more users, thus resulting in significantly larger projects.
This, in turn, has resulted in businesses’ growing acceptance of the need to prepare a strategic information
systems plan that facilitates corporatewide data sharing. This introduces significant interproject dependencies
as each project is building part of a corporatewide architecture. Thus, a project to construct a materials
management system can no longer be viewed as a stand-alone project. It must be integrated with the
purchasing, accounts payable, cost reporting, and employee systems.
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Zachman1 has compared the products produced during the construction of a building to that of a computer
systems project. Exhibit 29-1 summarizes the similarities between the products of the two industries. As with
construction projects, the first phase of a computer systems project requires the project manager to define the
-----------
objectives of the project and the scope of work to be completed. Once the scope is agreed to by the user group
(client) and the project team, the business is modeled so that the analyst can have a complete understanding of
how the user views the business environment. The architect’s drawings are used in the same manner as they
illustrate the building as seen by the owner.
After the models are developed to show the user’s view of the business, models are constructed to show how
the information system is seen by the designer. The architect’s plans are similar in concept as they portray the
building as seen by its designer. The technology model used for systems projects has equivalent objectives to
the contractor’s plans. Both take into consideration the constraints put onto the project by available
technology. The contractor must also be concerned with the outside environment.
Exhibit 29-1. Similarities between products of construction of a building and a computer systems
project.
Buildings Computer Systems
Architect’s Products Computer System Equivalents
Bubble Charts Objectives—Scope
Gross sizing, shape, spatial relationships Gross sizing, scope
Architect’s Drawings Model of the Business
Building as seen by the owners System as seen by the user
Architect’s Plans Model of the Information Systems
Building as seen by the designer System as seen by the designer
Contractor’s Plans Technology Model
Architect’s plans as constrained by Information system’s model
nature and available technology as constrained by available
technology
Shop Plans Detailed Representations
Description of parts/pieces Description of parts/pieces
Functioning Building Functioning Computer System
Finally, the systems projects require detailed representations that provide detailed descriptions of the parts and
pieces of the new information system. The shop plans are the equivalent building product. They also provide
descriptions of the final parts and pieces of the building.
As illustrated in Exhibit 29-1, both industries require similar products throughout the life cycle of the project.
Thus, the project manager of a systems project must manage the development of these products in much the
same manner as the project manager of a building construction project.
Systems projects are broken into phases that are similar to the phases of the building construction industry.
Exhibit 29-2 lists the analogous life cycle phases for projects in both industries. First, both systems projects
and construction projects have a conceptual stage in which the feasibility of the project is determined. The
costs versus benefits are measured, and the project is ranked with other potential projects to determine its
value to the company.
Exhibit 29-2. Similarities in life cycle phases of construction of a building and a computer systems
project.
Construction Computer Systems
Concept/Feasibility Conceptual
Planning Planning
Engineering Studies Definition
Detailed Engineering Design
Construction Implementation
Testing Conversion
Commission
The objectives of the planning stage are also equivalent in both industries. The primary objective is to
determine the scope of the project and gain agreement from the user (client). The most effective strategy to
accomplish the objectives is also determined. During the definition phase of a systems project, the
requirements of the user (client) are documented, and the current system is modeled so that the objectives of
the new system can be clearly defined. Engineering studies have similar processes in a construction project.
The design effort of a systems project and the detailed engineering of a construction project are also similar.
Both detail the requirements of the new system and provide for technical plans that will be used in the final
construction/implementation of the product. Finally, the implementation phase of a systems project consists of
the final coding and testing before the new system is converted into full-time use. The management of this
phase is very similar to the management of the construction and testing phases of a construction project,
which result in the commission of the new building.
The management functions of the systems project manager are virtually the same as the management
functions of the building construction project manager. Though the organizational structure used for many
information systems departments is a weak matrix, the primary responsibility of the project manager is still to
ensure that the project is completed on time, within budget, and at the project’s objective quality level.
The following management functions can be expected of the project manager in both the building
construction industry and the information systems industry:
• Planning
• Organizing
• Scheduling
• Monitoring
• Directing
• Integrating
• Controlling
• Reporting
• Negotiating
• Resolving conflicts
In addition to the above functions, the project manager of systems projects is usually the supervisor in charge
of many systems analysts and programmers. This provides the project manager with the added function of
staffing some of the project’s resource requirements. This has some advantages and disadvantages that will be
discussed in more detail later in the chapter.
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Title Some of the principal challenges facing IS departments attempting to implement project management include
difficulties in scope definition and management, the intensive multiproject environment, inflexible
organizational structures, and rapidly evolving development technologies and methodologies. The following
sections highlight some of these issues with particular reference to our experiences in the Southern California
Gas (SoCalGas) Company’s development environment.
-----------
Scope Definition and Management
In classical project management, scope definition and management is very critical to the success of a project,
from a schedule, resource, and cost management perspective. The scope statement defines what business
functions are under consideration for automation. It is just as important to define what is to be excluded from
consideration as well as what is to be included.
In traditional information systems development, project scope definition has been a very fuzzy and ill-defined
area. This is the result of a number of different reasons, some of which are:
• The interrelationship of business functions, causing more automation than originally planned
• The use of text to define scope, which often leads to misinterpretation of what is actually in the scope
• Difficulty in defining the end deliverables
• Frequent changes in business requirements during the project life cycle
In most large corporations there are a multitude of systems development efforts taking place simultaneously.
These efforts are sponsored by various customers (users) within the organization and are carried out by the
information systems department. The principal challenges in IS project management are as follows:
• There is a finite resource pool to draw upon for systems development efforts.
• Specialized technical resources are often required and need to be shared across multiple projects.
• Cross-utilization of resources leads to conflicts in resource allocation, which in turn causes schedule
delays and cost overruns.
• Resource management needs to be done on a real-time basis to control project costs.
Organizational Structures
The project organizational structure is another differentiating factor in information systems project
management. The structure adopted by SoCalGas is a hybrid matrix. In such a structure, the project manager
has dual roles: that of a project manager as well as that of a functional manager. This has resulted in a weak
matrix with the following organizational facets:
• Project managers are also the functional managers of many of the project team members (systems
analysts, programmers, etc.).
• Project managers can staff many of their projects with their own functional staff members.
• Project managers don’t have enough authority as compared to project managers in the construction
and aerospace industries. This situation is improving as project management implementation matures
within SoCalGas.
• Interface management is easier because of the fact that many project team members are also
functional subordinates.
• There is faster reaction time to project requests among direct reports.
• There is more control over direct subordinates.
• Project managers have more formal authority over project team members. This, in turn, enhances
team motivation because the project manager has both position and reward power.
• Conflicts within the project team are more easily resolved.
• The project managers do not have enough time to do either their project or functional tasks well.
• There is often a conflict of interest in setting priorities because of project priorities versus functional
priorities. Project priorities often suffer.
Exhibits 29-3 and 29-4 describe the involvement and contribution of the various information systems
departments at SoCalGas prior to the implementation of project management and after the implementation of
project management. It is clearly evident when the two exhibits are compared that the involvement of various
departments has increased in the entire project life cycle as a result of the decision to implement project
management in the systems development process. Exhibit 29-4 shows that there are now six groups
participating in a project that did not participate previously. The project manager has to spend a
disproportionate share of his or her time dealing with these project team members.
Exhibit 29-3. Involvement and contribution of information systems departments prior to implementation of
project management.
Exhibit 29-4. Involvement and contribution of information systems departments after implementation of
project management.
Systems development projects have been—and in the majority of cases, still are—very labor-intensive
undertakings. Essentially speaking, systems developers take a list of requirements from customers (end users)
and using their intellectual knowhow, convert these requirements into functional software applications.
To alleviate the labor-intensive facet of information systems development, a class of development
productivity enhancement tools has emerged. These tools can significantly shorten the development life cycle
as well as reduce overall cost.
However, this class of productivity tools is evolving at such a rapid pace that the majority of management
information systems/data processing organizations do not have the ability to keep up with the new
technology. This has led to a reliance on the tried and true (and inefficient) methods of systems development,
which are labor-intensive and less risky. Consequently, project management has also been viewed as part of
the new technology/methodology, and there has been significant resistance to its implementation.
Note
1. J. A. Zachman, “A Framework for Information Systems Architecture,” I.B.M. Systems Journal 26,
No. 3 (1987).
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Title
Chapter 30
Project Management for Software Engineering
----------- Lois Zells
Lois Zells & Associates, Inc.
Software engineering is the term applied to all aspects of information processing systems development and
maintenance. The term engineering is used to indicate that the procedures used in software projects are
comparable to the scientific method rather than to random artistic endeavors.
The study of software engineering management is broken into people issues and process issues. Although the
people issues are very important, they are not within the domain of this chapter. On the other hand, the
process issues will be covered in depth. The procedural side of software engineering management is further
divided into work that is done to build the system and work that is done to manage the project. When
practitioners do work to build the system, their efforts result in software specifications. When they do work to
manage the project, their efforts result in estimates and plans. Even in a construction project, these two
separate types of work occur, usually simultaneously. For example, the cement subcontractors may be pouring
the foundation (building work), while the project manager is planning the construction of the walls (project
management work).
Furthermore, the best project management skills alone do little to overcome deficiencies in the software
engineering management process—without an equivalent level of mastery in building the system. If the
project is on time and within budget and it solves the wrong problem, it is not likely to be of much use to
anyone. Furthermore, until planners understand the deliverables that are produced while building the system,
they will be hard-pressed to develop a thorough and all-inclusive plan. Identifying what deliverables are to be
produced, then, requires a complete understanding of the phases of development.
Portions of this chapter have been excerpted from Lois Zells, Managing Software Projects: Selecting and Using PC-Based
Project Management Systems (Wellesley, Mass.: QED Information Sciences, 1990). Used with permission of the publisher.
(1-800-343-4848). © Lois Zells, 1991; all rights reserved.
Traditional Development Phases
In any kind of a project—even a project to build a simple birdhouse—there are at least four phases.
1. Analysis: The builders must first determine what is to be constructed.
2. Design: The builders must then create a blueprint for the construction.
3. Construction: The product must actually be built.
4. Installation: The product must be qualified and put into use.
Distilled down to their most fundamental components, software projects also must complete the analysis,
design, construction, and installation phases.
1. Analysis: The software engineers must first define the business problem the software will ultimately
solve.
2. Design: The software engineers must then create a blueprint for the software solution.
3. Construction: The software engineers must write the code.
4. Installation: The code must be tested and accepted.
Actually, before any phases are initiated, it is necessary to evaluate the justification for software systems
services. A quick assessment is made to determine the justification of the request. Many projects, perhaps
even 50 percent, do not survive this initial screening.
Preanalysis
The early part of the analysis phase of most software projects is typically somewhat chaotic. Project
participants may not know one another and may be unsure of themselves; customers may have a hard time
conveying what they want; meetings may go astray; and the whole project may seem ungovernable.
Furthermore, one of the most serious difficulties that continues to plague software systems developers is
getting a clear understanding and agreement of who’s in, who’s out of the project effort and what’s in, what’s
out of the product effort. This definition is called the domain of study. Furthermore, it is essential to develop a
concise declaration of what’s important to the product and the project. In other words, the agree-upon
priorities must drive the project.
To crystallize these requirements, today’s more enlightened software organizations have added an
introductory phase to the project development process, called the preanalysis phase. Preanalysis is an
orientation and screening phase that helps to: (1) identify and resolve problems before the analysis and design
stages; and then to (2) identify the operational features and procedures necessary to complete the work
successfully; and finally to (3) diffuse any issues that will become obstacles.
Many of the current software specification techniques are weak from the perspective of not being able to
capture and address the questions of who the customer really is, what’s most important to the customer, and
which customers should have the highest priority. Lack of a clear definition of these elements is a significant
contributor to the creeping commitment that often destroys any success potential a project may have.
During this preanalysis phase, customers are identified; their high-level wants, needs, and tastes are captured
and prioritized; and the customers themselves are prioritized with respect to who should drive feature and
functionality decisions. Customer requirements are prioritized by customer area. A very important aspect of
this process is the resolution of conflicts in customer priorities.
Partititioning Analysis
Most software engineering authorities now agree that analysis, as a single phase in all but the smallest
software systems projects, is simply too big. Therefore, expert practitioners often take a spiral approach,
dividing analysis into more than one go-round. This technique employs the concept of controlled iteration:
for example, a high-level analysis, an intermediate-level analysis, and a detailed analysis. Some or all of the
specification development is executed concurrently—with each successive iteration becoming more and more
detailed—until all of the requirements have been accurately and completely captured.
The high-level analysis is an orientation and screening effort that, most importantly, confirms the domain of
study. It also provides a cursory evaluation of the business requirements, confirms the priorities, and describes
the value of each required feature.
During the intermediate-level analysis, the high-level specification is expanded, a project management
agreement is written, and the team drives to get a handle on how big the project really is. If the group is able
to ascertain that the risk is too high to try the project as it is currently defined, its members may reduce the
domain of study and the proposed system scope before proceeding any further. (The true definition of scope is
the part of the system, in a software engineering project, that will be committed to automation.)
The third analysis iteration is the time to dissect the business problem completely. It is during this effort that
the real job of analysis is completed. The most significant deliverable of this effort is the verified
requirements definition, which establishes the specifications for building the system. It describes in thorough
detail what the system must do in order to be deemed a success. Most failures to deliver the correct system
can be traced to the fact that even by this stage there was still no unambiguous agreement between the
developers and the customers about the system’s requirements. Emphasis, then, must be on the document’s
completeness and accuracy.
Postanalysis
At the conclusion of the business analysis, it is necessary to designate which features (or parts of features)
will be automated and which will remain as manual operations. Additionally, the parts elected for automation
should be mapped into hardware and software requirements. Decisions are made regarding batch processing,
on-line processing, distributed processing, database requirements, or any other technical approach. These
decisions serve as input to the selection of one or more purchased package solutions and/or to the design of
the automated portion of a new system.
Although the domain of study must be specified at the beginning of the project, it is not until the process of
carving out the boundaries for automation has been completed that the final decisions regarding scope are
made. Therefore, the scope is not truly defined until the end of this postanalysis phase. Subsequent changes to
the scope of the system are subject to the change management procedures described later in the chapter.
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The system is partitioned into pieces that will ultimately become groupings of source code instructions. These
groupings, usually called subsystems or programs, are in turn divided into modules, routines, subroutines, etc.
How these groupings interface with one another is called the technical architecture of the system. It is
analogous to the blueprint for a construction project and, as such, may be graphically represented in one of the
many acknowledged design diagramming techniques that are used by software engineers. The technical
architecture declares the basis system design, the control subsystems, and the data structure control interfaces
for intermodule communication.
External Design
External design—so-called because it considers design from the outside of the system (that is, the customer
perspective) without regard to the internals of the modules, programs, etc.—addresses such issues as design of
input screens and forms, hierarchy of screen menus, and design of output reports. In a prototyping
environment, some of the external design may have been done much earlier in the project. If so, the external
design (to the extent that it was not completed in the earlier phases) is finished now. Many of the deliverables
in this subphase will be direct input to customer procedure guides and manuals. Therefore, since external
design is so closely related to the documentation factors, these tasks must be closely coordinated with the
individual(s) responsible for customer documentation.
Internal Design
The internal design provides the detailed directions for module design, program design, database design, and
so on. These internal specs will be used, during the coding phase, to create source codes in one or more
compiled programming languages. Team members are assigned the responsibility for designing each module
(generally less than or equal to 100 source code instructions) or program (group of modules, routines, or
subroutines). The specifications include the name, purpose, language, calling parameters, calling sequence,
error routines, algorithms, module logic, and restart and recovery procedures. The database design—complete
with names, descriptions, values, size and format of fields, data usage statistics, the distinction between stored
and derived data, keys, access relationships and methods, and backup and retention criteria—is also finalized.
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AMA Handbook of Project Management, The
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Title Managing Changes to the Domain of Study and the System Scope
It is also in the early stages that unknown requirements start to emerge, both the domain of study and the
scope start to enlarge, target dates begin to slip, groups begin to make compromises, and the project often
starts to fall apart.
-----------
The organization must have a way to respond to changes in the domain of study and/or the scope of the
system. Many people try to freeze the specifications, but that often only leads to: (1) the discovery that people
change their minds anyway; (2) animosity when the system users feel they didn’t understand what they were
signing off to; or (3) an “on-time” system that doesn’t fulfill the customer requirements.
It is not possible to control change, but it is possible to manage it. Changes are initiated through a change
request that is assigned a number and entered into a change management log that keeps track of the current
status of the request. An analyst assesses the costs, the benefits, and the impact in terms of time, money, and
people. The change is then scheduled for consideration by a group of change management decision makers.
The change management decision makers consider the impact and prioritize the request: accepted, rejected, or
postponed until the next release. The necessary parties are notified of the decision and its impact on the time,
money, and resources of the project(s).
Implementation of Inch-Pebbles
How Small Is Small?
But what is the size of an inch-pebble? How small is small? Each of the inch-pebbles must be small enough
so that:
• A reasonable estimate may be figured for its completion.
• The estimate reflects reality.
• The confidence interval will be small.
• The organization may be comfortable about the level of “accuracy.”
• It will be hard to intimidate the estimator into reducing the estimate.
• The 100 percent completion level can be reached rather quickly.
• Managers know they’re in trouble before disaster descends upon them.
• When the job is done, there is a meaningful and verifiable deliverable.
An inch-pebble thus represents a work unit that cannot be meaningfully subdivided and is best completed
without interruption. In addition, to afford effective partitioning, estimating, scheduling, and status reporting,
a unit of work (an inch-pebble) produces a meaningful and tangible deliverable that can be verified, is
commonly assignable to one and only one person, and is usually completed in from four to forty hours.
Identification of meaningful deliverables is an area that causes lots of confusion when trying to partition the
development of specifications. For example, if an analysis specification is to be produced across the span of
several phases, it may be prepared at a high level in a Phase 1, an intermediate level in a Phase 2, and a
detailed level in a Phase 3. One could then say that it will not be completed until the end of Phase 3. However,
this would make status reporting and management of each phase very difficult. A better approach would be to
partition the development of each specification into a job that can be worked on as an inch-pebble and later
designated as 100 percent completed when it is finished. For example, an administrative system deliverable
could be (1) the high-level specification of payment processing, (2) the intermediate-level specification of
payment types, or (3) the detailed specification of backdated payment processing.
The implementation of the inch-pebble concept allows organizations to achieve many of the goals they are
attempting to satisfy. It also helps them to recall that many small estimates added together have less margin
for error than a single large estimate; therefore, they may more quickly realize their ambition for “accurate”
estimates. Additionally, “one job-one person” combined with status of “done—not done” dramatically
simplifies status reporting and thus the management of the project. (Remember: “one job-one person” is a rule
of thumb and, as such, there are always exceptions. For example, meetings and reviews are inch-pebbles that,
obviously, are assigned to more than one person.)
Setting a forty-hour maximum on inch-pebbles creates an environment in which a number of jobs are being
completed every week. As a result, crises are frequently identified soon enough to avert disaster. Not every
inch-pebble, however, is exactly forty hours long. Many are less than that and some may even be greater.
Therefore, not every job starts on Monday morning and finishes on Friday evening.
At last, since most organizations have few to no experts in estimating, the discipline of getting down to the
confidence intervals of four to forty hours goes far to diffuse the novice effect.
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To identify inch-pebbles of four to forty hours is not a trivial task. Although they are never faced at the same
time, there may ultimately be as many as 2,000 inch-pebbles in a medium-size project. Frequently, people
balk at what appears to be just so much overhead.
-----------
It is important to determine what makes sense in the organization, what information is needed, how often it is
required, and how reliable it must be. Organizations should decide:
• How much estimating expertise is on the team—and its effect on the accuracy of the total plan
• If the range that is selected is small enough to support a high degree of confidence in the accuracy of
the estimate
• If the range that is selected gives the status data soon enough (that is, how long the group members
can comfortably wait before knowing if they’re in trouble)
• How much risk can be borne
This approach has been implemented in many enlightened companies. Those that accept this concept buy into
certain givens. It is agreed that the project team members will be allowed the time to plan, in the first place.
Furthermore, since it is impossible to identify all of the inch-pebbles for the entire project at one sitting, only
those inch-pebbles in the short term will be included in the plan. Then, after completion of a preselected and
limited number of inch-pebbles, it is agreed that the team members will be allowed to use their newly
acquired knowledge (and be given the time) to plan the next short-term effort. It is also agreed that this
process may be repeated more than once for each milestone, phase, or project, depending on its size and
complexity.
Furthermore, it is also accepted that, during each replanning exercise, the new knowledge that is gained may
necessitate the implementation of one or more of the following project management strategies:
• Extending the finish date
• Adding more resources
• Eliminating features
• Risking (sacrificing) some degree of quality and/or reliability and/or performance
• Finding a low-risk method of improving productivity.*
*There are efficiencies to be gained in both the project management process and in the development
techniques. The introduction of new methodologies and/or technologies may, in the long run, improve
productivity. However, in the short term, the associated learning curve may actually appear to reduce
productivity and will certainly extend the dates. On the other hand, this learning curve may be offset by
“buying the expertise”—either by reassigning in-house experts or by hiring outside consultants.
Estimating
Some people would insist that accurate estimates in the software industry are impossible. It even seems
contradictory to put these two words together. To the contrary, in some organizations there are groups that
consistently give good estimates. Yet the skill does not seem readily transferable; and sadly, many people do
give very poor estimates. Careful investigation, however, has surprisingly shown that it isn’t the estimate that
has been so wrong. The problem often stems from the fact that the bulk of the effort required to complete the
job is simply overlooked during the estimating process. In other words, it’s what is left out of the estimate that
usually gets the estimators into trouble. Thus, the first challenge lies in finding an estimating method to ensure
that everything that needs to be included in the estimate is recognized. As a group, though, the software
engineering community has been unable to agree upon one commonly accepted estimating technique. Because
this discipline is still so new, no models have yet emerged as the standard.
The use of statistical theory can provide a foundation for: (1) providing estimates earlier in the project life
cycle than many of the traditional lines of code and function point techniques; (2) overcoming the uncertainty
experienced in estimating software projects in general; and (3) addressing the noncode-related aspects of
project management. The science of probability theory allows managers to substitute numbers in place of their
hunches or conjectures.
The Navy Special Projects Office, Lockheed Aircraft, and Booz-Allen and Hamilton employed statistical
theory in estimating and managing the Polaris missile submarine project way back in 1958. Specifically, they
applied the concept of uncertainty, the beta (’) distribution, and a formula for expected effort. They called
their process the Program Evaluation and Review Technique (PERT). This PERT estimating method was
quickly adapted in many commercial sectors, such as the construction industry. Similarly, use of PERT
estimating concepts for assessing lines of code was employed as early as 1976. Unfortunately, because of our
tireless search for the silver estimating bullet, the concept was usurped by other lines of code formulas and
such. To our chagrin, there is still no such thing as mindless estimating.
Estimating in Uncertainty
In software projects, team members are, in truth, usually trying to estimate in uncertainty. In estimating in
certainty, it may be possible to derive acceptable results by using just one estimate. But if there are unknowns
that may influence the estimate, it is advisable to provide a range of estimates instead of one predictor, to
compensate for the uncertainty or lack of knowledge. By providing estimates for: (1) the optimistic, (2) the
pessimistic, and (3) the most likely, we may come up with an acceptable range for the formula to compute
effort.
In analyzing these three estimates, it is expected that the pessimistic and optimistic estimates would occur
least often. Based on a formula called the beta (’) distribution, the formula for expected effort is:
(1 times the optimistic estimate)
+ (4 times the most likely estimate)
+ (1 times the pessimistic estimage)
6
This weighted average simply gives more importance to the estimate about which the estimator is most
certain (the most likely). It assumes that the most likely estimate will be true four times more often than either
of the other two estimates. At the same time, it biases the results so that the expected effort falls closest to the
side of the greatest uncertainty (either optimistic or pessimistic). Thus, it also allows for some compensation
due to that uncertainty.
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Title
Section XII
Research and Development Projects
----------- Chapter 31
Managing High-Technology Research Projects for
Maximum Effectiveness
William N. Hosley
All-Tech Project Management Services, Inc.
Research and development is the engine that generates sales and profit growth for corporations, creates
competitive advantage for entire countries, and begets quality of life benefits for all people. It is virtually a
matter of life and death for all stakeholders (owners, customers, employees, the government—in fact, the
entire general public) that R&D does the right things and does things right. This is especially true of the
high-technology environment, where advances require the skill of postdoctoral training and experience in
such fields as electronics, pharmacology, high-energy physics, computer design, photography, and
biochemistry. Since R&D is a project-by-project endeavor, doing things right is the equivalent of good project
management.
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Title The duration of the drug development process is five to ten years. There is a great deal of urgency to the
process, both for the sake of curing human illnesses and to maintain competitive advantage and help the
company’s bottom line. The relaxed freedom implied by Dr. Mees’s comments doesn’t fit very well with
today’s global competition and aggressive march forward.4
----------- At Merck, there is considerable individual freedom in the research process, but on a full-time basis, the
privilege is limited to those who have shown that they use the freedom wisely. On the other hand, an
opportunity is given to everyone to use at least a small portion of their time for personally chosen
investigation. This is a way to let serendipity surface.
Another lesson that can be learned from Merck’s example that applies to all high-technology R&D efforts is
the structuring of a “standard” timetable of sequence of events. Whether it be drugs, computers, aircraft, or
whatever, there probably is a logical sequence of events that leads from initial concept through development
and production scale-up to product introduction. The steps along the way should be well defined and
synchronized so that the elapsed time for their completion is minimized. It should be obvious that the less
time consumed in going from concept to market, the more competitive the company and the sooner and
greater the human benefit from the new product.
A Standard Process
Every company that depends on R&D for its growth should define a standard development timetable rather
than improvise a timetable for each new product that enters the pipeline. With a well-defined process in hand,
efforts can then be applied to streamline it for maximum R&D effectiveness.
Although the specific process would be different for each industry and company, a bare skeleton common to
many companies would include the following six phases6:
• Phase I: Preproject Conceptual Development
• Identify the need for the new product or service
• Generate creative ideas to fill the need
• Study the technology
• Conduct experiments to prove effectiveness
• Conduct patent literature search and apply for a patent
• Test ideas to uncover potential problems
• Consider ethical issues
• Select the most promising alternative configuration
• Conduct a business analysis
• Define the project
• Submit the project proposal to sponsor/management
• Obtain sponsor/management approval to proceed
• Phase II: Establishment of Project Organization
• Appoint a project leader
• Prepare the project plan and critical path schedule
• Determine resource requirements
• Prepare the preliminary design
• Estimate the project cost
• Estimate the market demand and revenue
• Refine the business case
• Obtain sponsor/management approval to proceed
• Phase III: Establishment of Feasibility
• Define the project team requirements
• Recruit and organize the project team
• Develop the detailed design
• Consider product quality, reliability, value, and manufacturability
• Conduct an analysis of competitive action
• Refine the business case
• Build a product sample or service simulation
• Conduct a performance evaluation
• Conduct potential problem/risk analysis
• Obtain vendor quotes
• Develop the marketing plan
• Finalize the design and business case
• Obtain sponsor/management approval to proceed
• Phase IV: Development
• Modify the design (if necessary)
• Refine cost estimates and update the business case
• Design tooling and manufacturing facilities
• Design packaging/presentation materials
• Order tooling and sample quantities of materials
• Recruit and train development personnel
• Produce testing quantities
• Conduct usage trials
• Prepare advertising and promotion literature
• Obtain sponsor/management approval to proceed
• Phase V: Production/Implementation
• Install tooling
• Order/receive pilot quantities of materials
• Produce the pilot lot
• Certify production process and qualify the product
• Produce promotional materials
• Train marketing and customer service personnel
• Obtain sponsor/management approval to announce product, scale up production, take orders,
ship product, and initiate service
• Phase VI: Project Termination
• Evaluate acceptance of the product or service
• Solve initial field problems
• Document the project
• Reassign the project team
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Title Of course, any specific application will differ from this outline. However, in a successful organization, this
step-by-step process will be clearly defined, with target times for each step. The target times should represent
“stretch,” but the goals should be attainable. Ideally, upon completion of a successful project on time and
within budget, there should be bonuses for the project team members who have contributed to achieving the
goals.
-----------
Streamlining the Process
Achievement of stretch goals not only involves attentive coordination of activities with prompt action when
delays are threatened; it may also mean taking risks. The main purpose of frequent reviews of project progress
in relation to the project timetable is to obtain early warning of problems. Some factors that could upset the
timetable are results of experiments that reveal unexpected technical problems, loss of key personnel, delay in
receiving critical materials or equipment, and postponement of meetings with key people. The project leader
must be resourceful and take action to overcome such problems.
Some additional ways of accelerating development time and streamlining the process are:
• Wherever possible, conducting activities simultaneously rather than sequentially
• Applying extra resources (i.e., additional people or overtime) to activities on the critical path
• Incurring the risk of starting a successor activity before the predecessor activity is complete (if
possible)
• Engaging more highly skilled people
• Subcontracting certain activities
• Expediting management reviews
Risk Management
On occasion, the project leader must take risks to keep the project on schedule. That is to say, he or she must
act with insufficient information to make a good decision. The risks taken should be calculated risks, not blind
ones. In other words, the information that is missing to make a good decision is clearly recognized and is
either too costly, too time-consuming to obtain, or simply unavailable. The outcome of experiments and tests
are typical examples. In these situations, whenever possible, there should be a contingency plan or fallback
position in case the needed information, when it finally becomes available, is negative. Of course, if the risk is
still too great to tolerate, then the project should be aborted or at least modified.
Unknowns that can turn into unpleasant surprises include: technical solutions that don’t work as expected;
experiments and tests that fail; unanticipated side effects or by-products; loss of key people; materials that do
not arrive on time; being eclipsed by an unanticipated, superior product announcement or patent application
by competitors; market research indication of a lack of customer acceptance; greater-than-estimated
development or product costs; and reliability, quality, or produceability problems.
Although having standard times to execute a standard process is an important project management tool for
planning R&D projects, it would be foolish in many cases to expect rigid conformity, especially where
uncertainties are involved. To have realistic expectations, it is useful to simulate the project schedule network
using one of several simulation techniques. A project simulation should indicate the minimum, most likely,
and maximum times a project should take along with a time probability distribution. GERTS, SLAM, and the
All-Tech Project Simulator are available software packages that can simulate project duration time
distributions.7 Also, many project planning software packages have the capability of answering “what if”
questions posed in the form of input variations.
In planning R&D projects, it is important to identify risks—that is, to define the technical, cost, and market
elements. Included as part of the project activity list should be efforts to obtain missing technical, cost, and
market information. If, as indicated above, this information is unknowable, then steps should be taken to
mitigate the risks.
In the R&D environment, one way to mitigate risks is to conduct redundant development paths with the
thought that if one approach doesn’t work, perhaps the other will. There can be multiple redundancies. Of
course, this approach costs more, but it may be worth it for the sake of reduced risk and elapsed development
time. One of the simulation approaches mentioned above could indicate the value of redundancy.
How does one measure R&D project management effectiveness and know whether it is good or bad in a given
instance? The answer is that it is not done with precision. One way is to determine how well each project team
adheres to the standard times of the standard process. In all honesty, however, most surprises are negative, not
positive, so adherence to the standard process is likely to be exceptional and on the “good” side of what’s to
be expected. The more uncertainties there are in the R&D environment, the more exceptional standard
adherence will be. On the other hand, it is likely that the more uncertainties there are in the R&D
environment, the greater the possibility of being unique and perhaps more profitable. Bold but well-conceived
ventures should produce dramatically profitable results. That’s the way it has been at the leading drug,
computer, and electronics companies.
Truth is found in the bottom line. A company can put lots of money into research, but if the effort does not
enhance sales growth and profitability commensurately, it can be concluded that the money has not been well
spent. Conversely, the high-technology company whose sales and profits are growing faster than the
competition’s has to have more effective R&D project management. Their people are doing more right things
and doing them right. Of course, one year doesn’t tell the story. A fair appraisal requires at least a five-year
span.
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Title
Chapter 32
R&D Project Management: Adapting to Technological
-----------
Risk and Uncertainty
Lee R. Lambert
Lee R. Lambert & Associates
Achieving a sensible, beneficial, and cost-effective application of project management in the research and
development environment can be as difficult and challenging as the technical problems the researcher is
attempting to solve.
Senior management, with a focus clearly on the business aspects of the task at hand, looks to the project
management process for assistance in “controlling” the research and, along with it, the cost and schedule
associated with the project. Unfortunately, especially for these business-driven managers, the use of project
management does not provide the panacea for the problems that historically rear their heads when dealing in
an environment of uncertainty and risk. Any effort given the distinction of being classified as an R&D project
is, by definition, filled with uncertainty and its accompanying risks. This condition is a given. Otherwise, it
wouldn’t be called an R&D project.
In assessing the applicability of using the project management process and in determining the degree to which
the process is implemented, the amount of uncertainty and risk associated with the specific project must be
thoroughly understood. Project management can’t be applied in the same way to all R&D projects. The
greater the level or degree of uncertainty, the more carefully the utilization of project management techniques
must be evaluated. Once this applicability assessment is complete, the project management tools and
techniques selected must then be conscientiously implemented and monitored to assure that the maximum
benefit-to-cost ratio is realized and maintained throughout the life of the project.
Selecting the most appropriate project management tools for R&D is no easy chore. It is clearly a misnomer
to view R&D as a single component process. Realizing the maximum benefit of project management requires
the user to recognize the subtle but critical differences between the R and the D. The life cycle of an R&D
project can realistically be divided into three distinct phases, two of which are research and one of which is of
development. The Phase I research (R) phase is exploring, or “basic.” The Phase II research (R) phase is
feasibility, or “applications.” Phase III—the development, or D, phase—can best be described as refinement,
or “optimization.”
As further clarification, when considering the many variations of R&D project management applications, the
potential user must understand that there are considerable differences in the technical scope and management
needs depending on the type of project being undertaken. There are two major types. Type 1 involves
product-oriented R&D projects, which are conducted in support of the development of a new product or to
facilitate the improved performance of an existing product. Type 2 involves information R&D projects, which
are initiated to gather, manipulate, and analyze data; support conclusions; and eventually produce a formal
report for publication as information for private organizations or government agencies.
Although the Type 2 example does clearly produce a product—a report—the output itself rarely passes
beyond Phase I of the process. However, the contents of this R&D-generated report may well serve as a
catalyst for additional R&D targeted at product development or product improvement.
Type 2 projects realize benefits from selective application of project management techniques. Caution must
be exercised to avoid overapplication. Any extensive or rigid use of project management techniques, beyond
that which will be discussed for Type 1-Phase I activity, most likely will prove counterproductive and could
actually impede Type 2 progress, rather than expedite it.
The consideration and selection of appropriate project management tools and techniques for application on
Type 1 R&D projects and the associated phases are the primary focus of this chapter.
Application Considerations
The world of research and development is a stimulating and exciting place to spend a career. Brilliant minds
produce a constant flow of bright ideas—ideas that promise products that improve the environment in which
we live and at the same time generate huge profits for corporations. The flow of ideas seems to be endless.
Unfortunately, only a few of the seemingly great ideas are able to survive the challenge of moving through the
product development flow cycle. As depicted in Exhibit 32-1, idea input is relatively unrestricted: Any good
idea is usually accepted into the cycle. The role of an R&D project is to bring realism to the process and to
substantiate which ideas are truly feasible and will, in fact, have significant social and financial impact on the
marketplace.
Since it is critical not to stifle creativity by limiting the number of ideas that are allowed to enter the process,
it is imperative that the evolution of each idea is carefully managed to assure proper balance of resource
utilization and timely decisions regarding the idea’s advancement to the next phase of the project. Using the
project management process improves a manager’s chances of “turning off” the idea faucet at the appropriate
time, therefore maintaining focus on those few ideas that present the highest return-on-investment (ROI)
opportunities.
As the traditional life cycle of an R&D project progresses from an idea to an actual new or improved product,
it passes through the three distinct phases cited earlier. The benefits realized from utilizing project
management techniques increase rapidly as a function of, and in direct proportion to, the reduction of
uncertainty. (See Exhibit 32-2.) It should be recognized that the project management process is founded on
the concept of fundamental structure and disciplines—two words that literally send chills up the spine of most
research professionals. Experience shows that when the use of project management concepts is suggested to a
researcher, likely responses are “Project management doesn’t really apply. My project is unique,” or “Project
management is too constraining. It stifles creativity.”
Those comments often are made with limited understanding and appreciation of the powerful benefits of
properly used project management tools. But for those researchers spending the majority of their time
investigating ideas in Phase I or pre-Phase I, these or similar project management application disclaimers may
have merit and should be properly considered. However, it has been demonstrated that even the most basic
research effort, with its associated high levels of uncertainty, can realize important benefits from selective and
common-sense-based use of some of the elementary project management tools and techniques—specifically,
work breakdown structures (WBS, of vertical or hierarchical relationships) developed to the third level and
network logic flow diagrams (horizontal or work flow relationships) without critical path considerations, but
with third-level WBS efforts’ dependent work input-output relationships established.
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Title Phase II and Phase III both realize substantial returns from the use of a project management approach.
Clearly, Phase III (development) stands to realize the highest returns as the level of uncertainty typically
reaches its lowest point in this later phase. Applications in Phase III have proved that the effort devoted to
developing project structure and using management discipline begins to pay big dividends.
-----------
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Title The efforts to assure that maximum advantage is realized from using the project management process on
R&D projects focuses on six key areas.
1. Refinement and expansion of the Phase I WBS. All required work tasks must be identified and the
appropriate responsibility assigned. This expansion effort includes a clearly defined scope of work for
each detailed WBS element (approximately five to seven levels) and the time and resources required to
-----------
complete the scope of work assigned at those lowest WBS levels.
2. Refinement and expansion of the Phase I integrated work flow diagram. The detailed work tasks
identified in the expanded WBS must be incorporated, and there must be development and
incorporation of time estimates for each working level WBS element. This produces a critical path
schedule for the project. Where possible, the work flow should be optimized through the use of overlap
or lead/lag dependent relationships, but on R&D projects, utilization of the overlap or lead/lag
scheduling technique should not be overdone. While the approach can result in notable projected time
savings, it often significantly increases the risk associated with starting one task before another task is
completely finished. In R&D projects the uncertainty factor can have a major impact on the actual
value or contribution of this technique.
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To determine any task’s EV point value, the formula is very simple: FI(FII + FIII) = EV points. Using this
formula, the maximum value for any one task is 300 EV points, and the minimum for any one task is 10 EV
points.
When the proper values have been determined for each task, the point values are assigned to the calendar
month in which the task is scheduled to be completed. It should be noted that since EV is awarded only when
tasks are completed, the shorter the individual task duration, the less distortion of the plan-to-actual
comparison database. Subjectively determined EV “progress points” can be awarded as work proceeds, but
before actual completion. Although possible, this approach is not highly recommended unless the use of
intermediate progress measurement milestones are incorporated into the plan. Once all task point values have
been properly assigned to a planned completion month, a project PMB curve (similar to a cost plan curve) is
generated as shown in Exhibit 32-4.
As technical tasks are completed, value is earned. The total EV for the individual or current month, or the
total for the cumulative-to-date period, can be determined and then compared to the expected achievement
point value represented by the PMB.
These EV plan-to-actuals comparisons can be generated and analysis conducted for the project total or any
subdivision of the total R&D project, i.e., by individual task, by technology or functional group, by product
component, or even by individual responsible research investigator.
This unique application of EV to R&D projects provides management information that is, by its very
derivation, clearly consistent with planned technical work and that work that has been accomplished.
Obviously, the EV integration of planned effort and actual accomplishment relies heavily on input from the
project research professional. The R&D project manager serves as the catalyst for the development of the EV
data and as a coordinator and/or integrater of the EV data at the various project summary levels. To realize the
full range of benefits from this EV approach, it is imperative that the WBS is properly structured and carefully
numbered to facilitate the many different “information sorts” requested for management use.
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Title
Chapter 33
The Behavior of Knowledge Workers on R&D Projects
----------- Jacques Marcovitch
University of Sã
o Paulo
Antonio C. A. Maximiano
University of Sã
o Paulo
R&D activities offer a fertile terrain for the use of project management techniques. This is so because most
R&D activities begin and end within a planned frame of time and cost and are aimed at solving specific
problems involving various degrees of investigation. However, project management techniques do not apply
directly from other types of activities to R&D projects, because R&D projects are different. And they are
different for many reasons. One reason is R&D people themselves, and they are the major subject of this
chapter.
The personality traits that most scientists and engineers have in common, the values that they share, and the
ways in which they are trained to think and work account for peculiar behaviors that have been studied and
reported by many authors.1
The following remarks are propositions rather than conclusions reached on the behavior of
professionals—specifically, young electronic engineers—in a study on Brazilian R&D projects. Whether
these propositions hold true for other countries or even other R&D settings remains a matter of investigation
and discussion. It must also be understood that these comments are the authors’ interpretations of answers to
questions made to R&D directors and project managers.
• Professionals tend to value a product’s technical merit rather than its organizational and business
implications. This means that technical people are genuinely interested in making products with the
highest scientific and technological quality possible; other considerations come later, if at all. The
higher the quality of the schools from which the students graduate, the stronger this attitude is. In
addition, individuals of great intellectual ability who hold degrees from excellent colleges tend to be
demanding toward themselves, their colleagues, and their work. In other words, the greater the
demands imposed upon them during their college years, the more demanding they become in
professional life.
• Professionals tend to value individual solutions. This appears to be a consequence of the selection
and teaching methods that are used in good quality college education. Since the student is individually
requested to accomplish highly complex academic achievements, what counts is the personal solution
that he or she gives to the problem and the extent to which this solution reflects a personal and not a
group actualization. The more challenging the problem, the more pressing the search for the solution.
This reinforces the spirit of the artisan in the technical professional, which makes him or her willing to
leave his “technical fingerprint” on the end result. As a possible undesirable outcome, some R&D
people may develop an attitude of refusal to accept other people’s ideas and points of view, especially
when they come from “uneducated” people.
• Professionals are methodical, analytical, and rational. This is the attitude that results from being
trained to translate every problem into manageable variables and parameters, and to try to solve
problems with formulas and techniques that maintain a cause-and-effect relationship. (This is a
behavior trait that scholars can greatly benefit from, since R&D personnel tend to be extremely
receptive to self-analysis when requested to engage in it. However, this trait does not help to solve
“people problems,” only to understand them better.)
• Professionals may develop an introspective behavior that may be a consequence of their artisan
attitude and of the complexity of problems. It is not unusual for a student studying to become a scientist
or engineer to work for days with little rest until a problem is understood or solved. Students and R&D
people accordingly train themselves to concentrate on problems with little possibility of being diverted.
One cannot say that this helps people to become extroverted. In addition to this, professionals may also
develop specific languages that both reflect the need for precision and are a means of excluding people
from the “inner circle.”
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Once graduated and in the market, professionals are confronted with the need to comply with the
requirements of life in organizations, as well as with the needs of organizations that have a survival drive and
often an orientation toward effectiveness or profitability, regardless of their being public or private. Business
----------- organizations, however, tend to give more emphasis to the requirements described below, which we call
organization demands. The question addressed in the specific cases presented below is whether “organization
demand” and “college offer” are convergent.
• Products with business merit. Organizations require products that have been developed taking into
account a market, a client, and the client’s needs, as well as being profitable—which does not
necessarily mean projects with the highest technical quality or the proper motivational appeal from the
professional’s point of view. The professional’s and the management’s concept of what project to work
on and on the schedules and resources needed to attain a satisfactory solution to the project problem do
not always coincide. These are not only potential sources of conflict but also serious problems in the
organization of project teams, since R&D people are able to exert a great degree of self-direction in the
choice of which projects to work on.
When there is no possibility of choice, the alternative may be the “smuggled project.” This is what
R&D people call experiments and even larger projects that have not been authorized by management,
but that R&D workers undertake from mere personal curiosity or because they think the projects should
be undertaken in the company’s interest. “When we do not succeed in convincing management that the
project is important, we ’smuggle’ it into someone else’s project, often a client’s project,” says one
engineer, “and sometimes management pretends not to see.” Good management policy? Hard to say.
After all, not all companies can afford to budget basic research, which would solve this problem.
• Group solutions to problems, within time and cost limitations imposed by the organization’s budgets
and schedules and commitments to clients. Organizations generally have little use for individual and
independent solutions. Instead, business organizations require collective solutions that are conducive to
products that reflect many individual contributions. These must take into account several aspects of
their operation, especially the production-marketing-service cycle.
• Sensitivity to the emotional dimension of human behavior. Organizations are above all “people
systems” that emphasize the requirements of life in common. Consequently, professionals are required
not to abandon their rational attitude, but to complement it with the ability to estimate and deal with the
impacts of their own decisions and behavior on their colleagues and subordinates. This is especially so
when people are in management positions.
• Initiative and expression. It is unlikely that a person without minimum communications skills would
be able to live within any organization, much less effectively perform a managment job. These skills
are required in any organization, be it public or private, and not only business organizations with an
R&D function. Therefore, the ability to move toward this profile is required of anyone willing to start
an organizational career. This is a much greater need for someone taking a management position, not
only because this person must reason within a new frame of reference, but must also induce his or her
subordinates to do the same.
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• Fear of loss of technical identity. Managerial activity invariably brings about all but a termination of
Title
technical activity. In lower-level management jobs, the person may still be partically a technician, but
as he or she climbs the ladder, more likely management absorbs the total work time. Along with the
fear of being unable to stay up-to-date, the person may actually be rejected by those whom he or she is
supposed to manage.
----------- It is not proposed here that management and technical professions are in totally separate worlds. As a
matter of fact, the contrary may be true, as suggested by the experience of many notable organizations
that have first-class scientists at their top management positions. Unfortunately, most people and
organizations still seem to experience difficulty in balancing the two.
• The ghosts of old projects. Frequently a new manager is haunted in his or her day-to-day managerial
activities by the old projects in which he or she had a technical assignment. This may make the
manager feel the temptation to continue working as a technician and prevent him or her from properly
concentrating on the new managerial duties. Many newly appointed technical managers also have an
inherent difficulty in abandoning the professional, specialized role. They are likely to lose sight of the
“big picture” and try to interfere in technical details of the tasks of project personnel—much to the
latter’s resentment.
• Lack of motivation. Some other problems in R&D projects occur in the staffing function. Among
them is the fact that scientists, engineers, and even technicians find it difficult to take part in projects
that they consider involve obsolete technology. They typically prefer to be assigned to state-of-the-art
projects and may even refuse servicing “old” projects in the field. This may not be a problem in Europe
or the United States, where technical staffing power abounds, but it poses a major setback in the
process of team building in a country where there is short supply of this kind of personnel.
It may be difficult in some cases to find people to fulfill management positions, since some
professionals are specialty-oriented and may have little if any organizational orientation.
Research-Oriented Projects
Research-oriented projects are the open-ended projects at the science end of the spectrum. They are
open-ended to the extent that the project manager and team do not know what they are going to find—or
whether they are going to find anything at all. Medical research, space and marine exploration, research into
subatomic particles, and the search for superconductive materials and their potential uses are examples of this
kind of project.
Since the search for knowledge and development of new technologies are the end products, the key feature of
these projects is uncertainty. Therefore, failure may be a measure of success, because failure shows that a
given path of investigation has proven ineffective and that something else has to be tried. The widely
publicized descriptions of how the Swiss IBM team reached their formula of superconductivity is a very good
example of the trial-and-error method that is often employed in similar undertakings.
Consequently, projects of this type are better evaluated when their long-term results are considered. And the
result is often the development of technical capabilities instead of material products. This does not mean that
management-type control of schedules and budgets is not important in these projects, but it is harder to
accomplish and has only secondary effects.
Development-Oriented Projects
New product development and engineering projects are different from research projects. In research projects,
people have a greater degree of certainty about what they want to accomplish, and the project is a way of
going from a known problem to a little-less-than-known solution that depends on the employment of available
technology. On the other hand, in development-oriented projects, the problem may be the attainment of a new
state of technology.
The degree of familiarity that goes along with these closed-ended projects, at the technology end of the
spectrum, does not imply an automatic condition of success as a result. Factors such as the ability to
understand the problem correctly and interpret input data from potential end users usually interfere either
positively or negatively with the strategic level of project planning, which is the definition of the end result to
be achieved. The quality of operations planning, specification and procurement of parts, and assembly tends
also to be a critical factor. This was dramatically shown in the U.S. space program with the Challenger shuttle
accident and the Hubble space telescope fiasco.
Notes
1. F. L. Harrison, Advanced Project Management (Hants, England: Gower, 1981).
2. S. P. Blake, Managing for Responsive Research and Development (San Francisco: Freeman, 1978);
Patrick L. Izanhour, “How to Determine When Project Management Techniques Are Required,”
Project Management Quarterly 13, No. 1 (March 1982), pp. 31-38.
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Title
Section XIII
Launching New Products and Build-to-Order Projects
----------- Chapter 34
Faster New Product Development
Milton D. Rosenau, Jr.
Rosenau Consulting Company
Companies introduce new products in a variety of ways, ranging from the chaotic to the systematic. While
successful results are obviously the payoff, it is unwise to rely on luck to salvage an unorganized procedure.
Although you can also obtain your new products from external resources, if you do so you usually must share
some of the expected profits.
Unstructured Approaches
Unquestionably, any new product development effort must be preceded by or initiated with an idea for a new
product. This idea can range anywhere from a vague notion to a specific and detailed construction. Exhibit
34-1 reveals two sources of ideas: a real need and technological capability. When the idea for a new product is
generated because someone has devised a solution to a market problem (market pull), you are more likely to
have a commercial success. In this case, you find or create a solution to a sharply targeted goal. For example,
many products created in response to market pull are incremental improvements over existing products. Ideas
derived from a technological capability (technology push) are less likely to be commercially successful. In
this case, you have a solution looking for a problem, and you must search for potential users whose unmet
needs can be satisfied at acceptable cost. If you can find or create such an unmet need, your technology push
product can sometimes have great market success, as demonstrated by 3M’s Post-it Notes.
Generating this idea may require time and effort, but in this chapter I intend to deal only with the process and
time following the articulation of an idea. Theodore Levitt has observed that you can put inexperienced
people together in a brainstorming session that produces exciting ideas that show how little importance new
ideas themselves actually have. Nevertheless, there are companies that mistakenly believe that an idea will
easily become a successful new product. Thus, once a superficially attractive idea has been articulated, such a
company pushes ahead, but it forgets or overlooks required steps and slips from its desired schedule.
Sometimes unstructured development leads to seizing the opportunity to demonstrate an early prototype at an
important trade show; later, the company is unable to manufacture production quantities quickly, which can
invite a more nimble competitor to beat it to the market.
This chapter was adapted by permission of the publisher, from Faster New Product Development: Getting the
Right Product to Market Quickly by Milton D. Rosenau, Jr., © 1990 AMACOM, a division of American
Management Association, New York. All rights reserved.
Exhibit 34-1. Two sources of ideas.
A Real Need Technological Capability
Market-driven Technology-driven
External orientation Inward orientation
Better success rate Higher failure rate
Another problem with the chaotic or random approach is that it fosters changes in the new product’s
specifications every time anyone has an embellishment. Without a formal structure in which to freeze
specifications and evaluate changes, creeping elegance often runs amok and nothing is ever introduced
because the far-off hills always look greener.
No rapidly growing company can afford to dedicate its most experienced people to working on only one new
product at a time; in fact, these people are likely to desire career growth, in which case they would
subsequently want to head their own new product development efforts. If the experienced team is not
available or if the product being developed is unique, there is greater risk that activities will be overlooked in
the mad scramble to finish. The cost of correcting a runaway new product development project can be
enormous.
Part of the alleged attraction of new product rugby is the absence of strangulating procedural obstacles that
sometimes accompany a phased new product development procedure. However, no one has to erect
unnecessary paperwork hurdles, and it is possible to have a simple phased new product development policy.
Any new product development project (or any other corporate activity) will be delayed by the need to prepare
an elaborate presentation, conduct a lengthy review, or await a tardy decision. The problem is with the
elaboration and tardiness, not with the phased approach. Reviews have to be thorough, not elaborate, and the
resultant decision has to be made promptly. Despite the allure of new product rugby, especially the
cooperative teamwork (which I strongly support), I am not aware of anyone who favors unsystematic,
unmonitored, unchecked, unplanned, or undirected new product development—quite the reverse. As a
practical matter, if you must play new product rugby, be sure to have some brief intermissions in which to
review the effort so as to lessen the risk.
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Title In distinction from the first four concepts illustrated in Exhibit 34-2, I propose shortening the total new
product development process by having short, sequential phases as illustrated in Exhibit 34-2 (e). By analogy
to rugby, this can be thought of as a soccer or a basketball game (without a halftime recess) in which a
cooperative team moves together toward a goal. This offers lower risk than overlapped phases. I eliminate (or
minimize) dead time between phases to shorten the total process. Most companies will find that the shorter
----------- phases, in which the required work is completed very quickly, are realistically achievable.
Finally, I propose separating the feasibility work and the maintenance work from the time-critical new
product development process. These two activities are important, but the first, feasibility, cannot be rigidly
scheduled. The latter, maintenance, cannot start until the new product is introduced.
The specific practices in different companies with which I am familiar apply various portions of phased
procedures. In one industrial product company, the steps or phases are: (1) idea, (2) feasibility phase, (3)
specification phase, (4) breadboard phase, (5) engineering prototype phase, (6) pilot lot phase, (7) production,
and (8) follow-up. In one customer product company, the approach is as shown in Exhibit 34-3. A process
business might use laboratory feasibility, process development, pilot plant, semicommercial or midsize batch,
and full-scale commercial production phases.
Stage 1 : Ideation
• Idea generation
• Preliminary criteria screening
• File search and secondary data investigation
Stage 2: Concept testing
• Concept and alternative product positioning
• Concept evaluation
Stage 3: Product testing
• Prototype development
• Consumer product testing
Stage 4: Test market
• Marketing plan
• Test marketing and evaluation
Stage 5: Commercialization
• Market expansion
1. Improved understanding. Comprehension of the participants is improved when you use a phased
approach. It is much easier to understand a short-term program and the steps involved in it than to
understand a much longer and necessarily more complex program. In a short phase it is possible to start
out with all the steps you have to undertake explicitly articulated and identified. In addition, you can
easily list the required steps that comprise the new product development process in their time sequence.
Then, your development team is not likely to be suddenly surprised by the requirement to undertake
some development activity for which they had not made allowance. Exhibit 34-4 illustrates that an
ambitious new product development goal must necessarily have some initial uncertainty about the exact
objective and when it will be achieved. In a single phase, however, you only have to accomplish certain
things, not the entire totality of steps required to introduce a new product. Distraction is reduced
because you don’t have to deal with unrelated future activities. Thus, a short phase is easier to
understand than the entire new product development process. To put this differently, a specific
near-term goal is easier for people to understand than a long-term, and thus somewhat imperfectly
defined, goal. The target is both more precise and less remote.
2. Greater urgency. Not only are the participants more likely to have a better schedule plan for a fairly
short phase, but they are also less likely to let the clock run without making progress. There is a greater
sense of urgency. It is hard to let the first month of a three- or six-month phase slip by without making
progress. Conversely, participants can all too often exhibit low schedule urgency at the start of a
three-year product development effort.
3. Reduced risk. Short phases have lower risk. Not only is the schedule risk less, but the financial risk
is also less. You approve only small development increments at any given time, so these are inherently
less costly than the entire development effort. This obviously limits risk. (Also, you have approved only
a limited, specific effort, so there is less temptation to change specifications during a short phase.)
Approving a phase does not guarantee that anyone must approve the subsequent phases. Clearly, one does not
approve a phase without an expectation that one will approve subsequent phases. However, if the goals of an
approved phase cannot be achieved, then you do not have to approve subsequent phases. The goals of a
specific phase on a particular new product development effort might in fact be achieved satisfactorily, but
approval of the next phase can still be withheld to reallocate resources onto a higher priority or more
promising new product development effort. In approving the entire development project at the beginning,
there is both a long period of time for the entire development cycle as well as a large amount of money.
Consequently, management has less assurance that the time and money will be efficiently used.
Conversely, in a phased approach, where each incremental work package is itself relatively small, there is less
opportunity to use resources aimlessly and ineffectively, especially since the approval for additional,
subsequent work is made only after milestones are successfully achieved. You can stop work in the middle of
a phase if an unexpected, revolting development occurs. Similarly, one of the benefits of any phased approach
is that you can discontinue less promising efforts even if they are progressing in a fully satisfactory way. This
allows your corporation to concentrate its limited resources on the few most promising new product
development efforts. It is much better to produce a few successful new products than to work with great
energy on many and produce none.
Overview of Approach
The general phased approach that I favor is neither a rigid straightjacket nor a magical solution to the complex
process of developing a new product, but it does avoid many of the common pitfalls that can needlessly delay
the new product development process.
In broadest overview, there may be three activities involved with the introduction of a new product: (1)
feasibility, (2) development, and (3) maintenance. Obviously, an idea for a new product, which may range
anywhere from a vague notion to a specific and detailed construction, must precede or initiate this sequence of
activities.
Exhibit 34-5 lists these three activities and also shows four development phases: (1) optimization, (2) design,
(3) preproduction, and (4) production. These four phases are illustrative, not prescriptive. You must have
optimization to establish firm specifications; and this can be followed with one or more phases leading to
routine new product shipment. These four phases, or others better suited to your business, divide the total
development activity, which is often lengthy, into short periods, each of which has a specific, limited goal, as
the exhibit shows. Thus, each phase involves only a portion of the work required to introduce a successful
new product. The total budget for all development activities in the company is its new product development
budget less those amounts reserved for feasibility and maintenance activities. (The new product development
budget is often called the research and development budget, even if very little research is truly included.)
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Title A more general view is shown in Exhibit 34-6 (in which the specific numbers at the bottom depicting the
number of ideas and relative cost are meant to be conceptual rather than exact). This highlights four other
aspects of my phased approach.
1. While it should be easy to initiate a development activity, you filter out less promising efforts as you
move progressively through the phases, which helps you concentrate your company’s limited resources
-----------
on the better opportunities. (Or, to put it differently, you have to kiss a lot of frogs to find one prince.)
Exhibit 34-5. Activities and development phases involved in the introduction of a new product.
Exhibit 34-7. Example of new product development work under way in a corporation.
The optimization phase must be separate from and precede the design phase because it is impractical, if not
impossible, to make a schedule or budget for the design phase until the product specifications have been set,
as illustrated in Exhibit 34-7. It is clearly possible to omit the optimization phase if the product specifications
are obvious and you do not require market research before initiating the design phase, as illustrated by one
project in the exhibit that commences with the design phase. Undertaking the optimization phase is normally,
but not necessarily, a commitment to undertake the design phase. However, undertaking the design phase does
not constitute a commitment to produce the new product, even though there may be a schedule for a proposed
market introduction. The preproduction activity normally is a commitment to produce; however, you can stop
a development activity in the preproduction phase (or even in the production phase). You might do this, for
instance, if you learn that a competitor has just introduced a similar or better product at a selling price lower
than your intended price.
You will have a better track record meeting your new product development objectives if you recognize that
feasibility efforts and maintenance efforts must be allowed for but made separate from the time-critical new
product development efforts themselves. Feasibility and maintenance commonly require the same human and
physical resources that the new product development activity requires. The three new product development
activities in Exhibit 34-7 that reach completion all illustrate subsequent maintenance activity. If your
company does not recognize that reality, then you will find that schedules for new product development
efforts are not met. There are two reasons for this, and they are different depending on whether you look at
feasibility or maintenance.
If there are no separate feasibility efforts allowed for, then new products that require new technology or move
into totally new markets require inventing on schedule—which, in fact, does not occur on schedule. The
feasibility activity, as important as it may be, may require an invention or technical breakthrough that cannot
be scheduled; thus, the most that can be done here is to identify that requirement, provide resources, and
develop a sense of urgency. To put this differently, the goal of feasibility efforts is to give you a stockpile of
proven technologies in the form of breadboards, bench-scale chemistry demonstrations, completed analyses,
or, perhaps, new debugged software algorithms. Or, you may have feasibility activity efforts to evaluate
unknown markets or to experiment with new manufacturing technology.
After you start to sell a product, maintenance activity may be required. Typically, a user, a customer, or
perhaps the sales department discovers that there is some problem. When this happens, you must solve the
problem immediately. In many cases, the people who did the original product design can solve the problem
most quickly. Unfortunately, this is especially true when the problem arises due to a software defect (or bug),
because the documentation is often defective or nonexistent. If you have not allowed for this reality, then your
next new product development effort will suffer because the people who work on it must go back to
firefighting on the prior product’s maintenance problems. Realistically, therefore, you must either have a
separate maintenance group (commonly called sustaining or continuing engineering), or you must not
schedule the development effort of subsequent new products on the assumption of 100 percent availability.
You should examine your own company’s historical record; but, as a guideline, only about three-fourths to
four-fifths of the time of your development people is available for development if they must also do
maintenance work.
Finally, when you establish a phased approach such as this, you must always permit an escape clause if the
new product itself can’t fit this exact procedure. For instance, you can extend or recycle any phase, although,
as a general rule, this may be a danger signal suggesting that the new product development effort is seriously
offtrack. Similarly, you can omit these phases. In your own company, because of your market position,
competition, or corporate culture, you can combine or divide these phases differently to provide a procedure
that is most useful in your own organization. There is no single right way to carry out new product
development. In fact, you may want to have different procedures for different kinds of new product
development efforts (for example, totally new to the world, minor revision, and so on). You can create a
summary table (such as Exhibit 34-5) for whatever procedure(s) you do adopt, but you have to decide which
characteristics and phases to define. From time to time specific cases may require a deviation from your
company’s general procedure, which is acceptable as long as the key people understand clearly why it is
happening. As an example, you can exempt some very small projects from many of the detailed reviews
normally given to a larger new product development effort. Obviously, the risk of lack of control for
exempted projects is much greater, but that risk may result in less expected cost than the certain cost of
subjecting very small projects to even a simplified new product development procedure.
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AMA Handbook of Project Management, The
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Title
Chapter 35
Innovative Program Management: The Key to Survival
-----------
in a Lethally Competitive World
David Gordon
University of Dallas
J. Royce Lummus, Jr.
General Dynamics Corporation
As the world becomes smaller and more economically interdependent, corporate survival is rapidly becoming
more and more dependent upon successfully competing with worldwide competition for market share. In this
lethally competitive environment, innovative program management is the key to survival by allowing
organizations to: (1) select the right programs to pursue using sound financial and programmatic success
criteria; (2) execute these programs competitively, using methods like integrated product development to
speed the development and reduce costs of new products; and (3) help to instill the cultural change of total
quality management that allows these methods to work.
There must be a rational evaluation, screening, and selection process for determining which new program
opportunities the corporation should pursue. The program manager must understand and utilize this process to
select the program to pursue and to gain the support of corporate management. Many successful corporations
use a process similar to that shown in Exhibit 35-1. The exact formulation of the process is not as critical as
the inclusion of all of the critical elements in the evaluation of the program’s potential success.
The suggested process for financial evaluation and selection of new business programs that fit corporate
strategic product line ground rules is as follows:
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The corporation dedicated to a TQM philosophy rapidly adopts the use of the cross-functional team approach
because the aims and mechanisms agree. TQM is an approach to managing that continuously seeks to
improve the quality of goods and services by the participation of all levels and functions of the organization.
TQM (like the cross-functional teams) recognizes that poor quality results from voids or overlaps of
responsibility; solutions are sought by identifying and resolving these voids or overlaps. This commitment to
quality means establishing a clear picture of the corporate mission and conducting an analysis of the
organization’s processes—including its structure, policies, procedures, functions, relationships, resources,
products, services, and suppliers—in light of its desire to provide customer satisfaction to both internal and
external customers. In addition to a management commitment to achieving a cultural change permeating all
levels in the corporation, several key components usually attributed to TQM are:
Three major principles must be followed if cross-functional team implementation is to achieve an improved
competitive capability in a TQM environment.
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Title
Chapter 36
Product Development Challenges in the
-----------
Telecommunications Industry
Sri Sridharan
Alcatel Network Systems
In the business of new product development, the most critical factor is getting to the market quickly.
Historically, products that entered the market early with adequate quality and price have proven more
successful than products that got to the market later with better quality or price and with more bells and
whistles. The idea is to gain market acceptance of a simple version, get the customer response, and then
establish enhancement directions. This is not a new idea. Ford’s concept of “any color you want as long as it
is black” has a similar basis.
The telecommunications market poses additional unique problems. The customers in the telecommunications
market have definite procurement cycles and it is critical to meet these needs with the right product at the
front end of this cycle. The network is not totally standardized, to allow modular procurements that operate
routinely. Systems engineering effort is required on the part of the customer to make the procured systems
operational. This leads to a requirement to minimize variations in equipment in order to minimize the systems
engineering effort. Therefore, most telecom operating companies select one or two vendors and stick to them
as long as the products are functional and the costs are reasonable. The challenge the vendors have is in
becoming the candidates for qualification when the customers are ready. This is a moving target depending on
customer needs and the status of competitors. Missing this qualification opportunity is just as bad as missing
the whole market window. This emphasizes the fact that whatever we in the telecommunications industry do,
it better lend itself to reduced cycle time.
Telecommunictations products have evolved over time to become more and more complex, requiring higher
technology and more integration. The products, therefore, take a longer time and larger investments to
develop. However, at the same time the life of products in the field is getting shorter. Microwave radio
products in the 1970s and early 1980s had a useful life of eight to ten years before becoming obsolete, but
recent products have a much shorter life as a result of the pace at which technology is changing. The cost
pressures faced from customers and competitors are also intense. In a nutshell, this means developing
high-technology products with high investments in a short period and being able to survive short payback
periods and intense price wars.
This chapter was adapted from Sri Sridharan, “Managing Changes in Telecommunication Product
Development,” Project Management Institute Seminar/Symposium, Calgary, Alberta, Canada, October 1990.
Reprinted with permission of the Project Management Institute, P.O. Box 43, Drexel Hill, Penn. 19026, a
worldwide organization of advancing the state-of-the-art in project management.
The objectives are clear: Reduce cycle time. Reduce cost. Extend product life. And in trying to achieve these
objectives, don’t disrupt ongoing projects.
Most product development R&D organizations have a product-oriented structure. High-technology product
development efforts are normally driven by technical experts who generally do not have project-oriented
management skills. The challenge is in creating this project management focus and yet not compromising on
quality or technology. The logical answer is getting a project manager to worry about project-related issues.
The challenge remains in placing the project manager appropriately. In most construction projects and
government-related development projects, the project or program manager heads the whole operation
exclusively or in a matrix fashion. But in a high-technology development project that demands just as much
technical direction as it does project direction, a creative organizational structure may be required to strike the
balance.
Research on project management suggests getting a project manager and giving him or her as much authority
as the organization’s culture permits. Irrespective of where the project manager is placed and what his or her
authority is, there are some significant top-down directives that can be provided to enhance the project focus
and to help shorten the development cycle.
• Develop the schedules with an emphasis on deliverables.
• Provide the greatest visibility possible to the schedule milestones with focus on near-term goals.
• Monitor the milestones closely.
• Celebrate making the milestones.
• Encourage team effort to minimize and make up schedule slips.
It is important to recognize that there is no good or bad organization structure. The structure evolves from the
culture of the organization and the strength and weaknesses of the people available. Some structures are more
conducive to functional excellence than the structures associated with project management. When it comes to
performing the balancing act between promoting functional excellence and maintaining project focus, it takes
leadership and imagination in setting the priorities and providing clarity in mission.
The structure is important. Changing the structure for improving effectiveness is important. The suggestion
here is to make a number of small changes over time to position the organization toward success. While living
with the nonideal structure, provide the leadership to gain control of the mission, which is to shorten the
product development period.
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Title All contingency actions must be considered to reduce the risk relating to such custom component
development in a project. In addition to simulation, breadboarding and second-sourcing may be used. Parallel
effort on achieving the ASIC’s functionality using discrete components may be considered for initial product
release. Adequate resources must be applied to ensure thorough planning, design, testing, integration, and
documentation of the component. The ASICs must be defined in their entirety as early as possible so that a
----------- redesign does not delay the entire program. Reuse of already available ASICs with proven performance must
be encouraged. The ASIC vendor’s capabilities, capacity, and strategic orientation must be thoroughly
researched prior to signing the contract. A number of intermediate milestones must be defined in the ASIC
fabrication process to enable progress measurement. A detailed test plan must be developed and executed so
that there are no surprises while integrating the ASIC to the product.
Developing a base product on a hardware platform and initial load of software and then progressively
developing variant software to customize or enrich the features proved to be a great way to extend the life of
telecommunications products in the past. In the mid-1980s, the software effort on a transmission product was
less than 5 percent. Today, the same type of product is designed with software representing about 50 percent
of the total effort. This provides the flexibility required in today’s products to extend product lines. Also,
implementing a given feature using software instead of hardware might reduce the product cost, since in the
telecommunications field, fixing software problems is perceived to be easier than fixing hardware problems.
If all this sounds too good to be true, it is because getting there is not easy.
There is significant systems engineering effort required in partitioning hardware and software at the systems
level, and then integrating and testing the system as a whole. There are gaps in skills that must be recognized
and filled in order to perform these tasks. For instance, in the area of telecommunications transmission
product development, the systems engineers had always been hardware-oriented, and the software systems
types rarely had adequate experience in transmission products. This forces the creation of a new breed of
“requirements”-type engineers and “integration”-type engineers. These groups must be developed from the
existing base of systems engineers, and this might require some training in software development areas. Even
after crossing this bridge, there are lingering problems in synchronizing the efforts. Partitioning into hardware
and software can never be clean and complete in reality, particularly when the product evolves through
development. Therefore, software development normally has a tendency to wait for the more physical
hardware development to gel and become completed. This puts the software development always behind
schedule.
Another problem faced is having to produce and maintain a number of hardware prototypes in order to
develop the test-bed or platform where the ongoing versions of software can be tested. Therefore, although
higher software content lowers the product cost, the development cost can be significantly high. This change
of product content translates into changing the skill-mix of the engineering organization and developing a
number of new procedures to manage the process. This can be traumatic if it is not planned carefully.
Retraining selected engineers, forming the “requirements” and “integration” groups, defining the contents of
the documents to be created, and managing the test-beds and the integration process are difficult tasks
requiring attention to details. But the transition has definite promise for enhancing the product life.
Conclusion
Telecommunications product development as a whole is facing new challenges. The lead times are getting
shorter as a result of unpredictable market windows. Development costs and cycles are greater because of the
complexity and flexibility of the products demanded by the market. Product life is getting shorter because of
the pace at which technology is changing. There is intense competition in the U.S. market with a number of
international vendors creating price wars. To survive these challenges, several changes must be made in the
way we in telecommunications do our business.
We must review the organization structure to identify opportunities to bring better project focus and reduce
development cycles. Technological solutions like ASICs should be used to bring down product cost. And we
must develop a flexible product architecture that can adapt to future requirements, thus extending the useful
life of product in the market. These changes are difficult, requiring leadership and vision, careful planning,
and strategic implementation. Changes must be phased to minimize the pain. Achieving the final solution
might require making a number of small changes in the right direction.
The customers in the telecommunications field are no longer excited about a high-tech gizmo that meets a
niche application. They demand a network solution that integrates various types of equipment, supports
multiple applications, and will stand the test of time without becoming obsolete. This clearly indicates the
need for long-term planning. A living strategic plan that is well understood and established as the basis for
defining all projects can do wonders in meeting market needs in a timely manner.
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Title
Section XIV
International and Cross-Cultural Projects
----------- Chapter 37
Managing International Projects
Larry A. Smith
Florida International University
Jerry Haar
University of Miami
As international projects proliferate, the need to identify, distinguish, and respond effectively to a distinct set
of managerial requirements is the foremost challenge facing international project managers. Consequently, it
is necessary to understand the project management system and consider the unique attributes within the
international setting. It is within this framework that this chapter is developed showing an overview of
international project management.
Plans
International project management plans are subject to the same threats and opportunities as domestic ones.
However, there are a number of additional constraints that shape objectives, goals, and strategies. Basically,
foreign environments are more complex. Factors such as political instability and risk, currency instability,
competition from state-owned enterprises, pressures from national governments, and nationalism can all
interfere with project management planning. Strategy development, therefore, requires that the company:
• Evaluate opportunities, threats, problems, and risks
• Assess the strengths and weaknesses of its personnel to carry out the job
• Define the scope of its global business involvement
• Formulate its global corporate objectives
• Develop specific corporate strategies in the organization as a whole1
Recognizably, no prescription can be ironclad. Moreover, the human dimension in project management is of
the utmost importance in international projects. Many projects that are technically, financially, and
organizationally strong have failed as a result of cross-cultural factors—that is, the inability of project
managers and supervisors to comprehend and respond appropriately to foreign environments. As Copeland
and Griggs state, project managers and others working around the world must be sensitive to these factors.
In Asia, the Arab world, and Latin America, a manager needs a warm, personalized approach,
demonstrated by appearing at birthday parties and soccer games, walking through the work areas
often, recognizing people by name, talking to workers and—even more importantly—by
listening to them. In Latin America and China, it is important to drop in periodically for social
visits with workers inquiring about their health and morale without mentioning work problems.
Without singling out an individual, the group should be complimented liberally to give everyone
“face.” Evenings out are an integral part of business, most notably in Japan. Plan your schedule
so that plenty of time is regularly invested in these personal contacts. Don’t depend on memos.
Don’t be too busy.2
With this attitude of requiring greater time for socializing and small talk, time estimates require slightly
different input considerations than in the United States. Managers must plan accordingly.
Control Systems
Basic to any project management system is a control subsystem comprised of standards, comparison, and
corrective action. Control and its associated problems in international projects are much more complex than in
domestic ones as a result of cultural, economic, political, and legal environments. Geographic distance,
language barriers, communications habits, culture, and differing frames of reference all influence the control
subsystem.7 For example, a lack of understanding and acceptance of a group’s cultural values could well
impair a manager’s ability to evaluate information accurately.
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Title Criticism and how it is expressed can seriously affect managerial control; detailed reporting and tight controls
are not accepted in some cultures. For example, in the Japanese culture, maintaining group cohesiveness is
more important than reporting a problem to a superior; supervisors tend to solve problems at the group level
before referring them to upper management.8 Essentially, the astute manager is able to negotiate a successful
balance between project control imperatives and the reality of the cultural milieu in which the project
----------- operates.
Organization
Authority, responsibility, and accountability vary by project, culture, and the company’s preference. For
example, highly technical and security-sensitive projects tend to be more centralized and more tightly
controlled. Group decision making seems to work well in Japan and is being promoted in the United States,
but it is not as prevalent in other societies.9 For example, French companies show more autocratic behavior,
while large and experienced companies in the United States and the rest of Western Europe exhibit the highest
levels of management delegation.10
These findings are germane to project success. For while there are many reasons for the failure of projects in
the international environment, the most significant is the inability to get maximum performance out of people.
Each culture has different expectations of the boss-subordinate relationship.
The definitions of responsibility, authority, and accountability vary from country to country. In many
countries authority in business and government is inherited. Thus, one notes the difference between respect
that has to be earned, as in the United States, or respect that is assumed due to lineage, family, birth, etc. All
too often in some countries, management and policy-making jobs are awarded to individuals based upon
status and position rather than merit. Consequently, Western project managers in many cases must deal with
individuals whose professional competence is not always high.
Position, rank, authority, and respect are supported in many foreign countries by informal and formal codes of
dress, behavior, and attitudes. It is generally well understood who is in charge. Leaders and senior executives
in some of these countries do not do their own shopping, drive their own cars, or mix with the masses.
While delegation and participative management are promoted and practiced in the United States, this is not
the case in many foreign countries. Clearly, these organizational and operational patterns significantly affect
project management staffing, planning, and implementation overseas.
Cultural Ambience
Unquestionably, cultural factors—values, attitudes, tradition, beliefs, behavior—are the principal factors
influencing the successful management of projects. What specifically do we mean by culture?
Culture is the distinctive lifestyle of a particular group of people. It is composed of an interrelated set of
systems: kinship, educational, economic, political, religious, health, and recreation.11 As Harris and Moran
state, “A cosmopolitan manager, sensitive to cultural differences, appreciates a people’s distinctiveness and
seeks to make allowances for such factors when communicating with representatives of that cultural group.
He or she avoids trying to impose one’s own cultural attitudes and approaches upon these ‘foreigners.’”12
Not surprisingly, most problems that managers living abroad face stem from the value orientations of
different cultures.13 The most frequent problems center on individualism, informality, materialism, attitude
toward change, and orientation toward the concept of time. Some of the more germane dimensions of value
structures that can influence the conduct of business (and, of course, project management) in a cross-cultural
setting are listed in Exhibit 37-1.
Human Subsystems
Human subsystems in international project management—motivation, communications, negotiation,
conflict—are by their very nature far more complex and complicated than in the management of domestic
projects.
Self-esteem and the social status of most Americans are derived from professional accomplishment. With
little job security and modest social security, U.S. workers are motivated to work hard in order to earn money.
But motivation varies widely by country and culture. To the French, quality of life is what matters most.
While appreciative of the industriousness of the U.S. worker, the French value free time and vacations to a
higher degree. In Eastern Europe, on the other hand, bonuses for salaried workers are emphasized strongly,
since there are fewer other motivational options.14 In Japan, society and company come first, and workers are
motivated by permanent or lifetime employment, bonuses, and fringe benefits based upon the company’s
performance as a whole. In many developing countries, career and personal development are key motivations
in scientific and technological areas.15
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Individualism Collectivism
----------- Precise time reckoning Loose time reckoning
Future-oriented Past-oriented
Doing (working, achievement) Being (personal qualities)
People controlling nature Nature controlling people
Youthfulness Old age
Informality Formality
Competition Cooperation
Relative equality of sexes Relative inequality of sexes
Source: Gary P. Ferraro, The Cultural Dimension of International Business, © 1990, p. 115. Adapted by permission of
Prentice-Hall, Englewood Cliffs, New Jersey.
Turning to communications, this subsystem is a dynamic verbal and nonverbal process.16 Body language,
dress, and other nonverbal gestures contain messages, whether intended or not. Word choice, tone of voice,
and inflection can significantly affect work relationships in project management. Criticism or sharp
disagreement with native managers in the presence of others can permanently undermine work relationships
in both the Arab and Latin worlds. As for symbols, an American manager who brings yellow flowers to his
French colleague’s wife is unintentionally conveying infidelity. This all means that:
In Asia, the Middle East, or Africa, Americans need to read between the lines. We need to know
the context of a communication to understand it, because that’s where much of the information
is. The anthropologist Edward T. Hall calls these cultures “high context.” The opposite are “low
context” cultures, such as Switzerland, Germany, and Scandinavia, where information is explicit
and words have specific meanings.”17
Exactness and precision guide conversations and discussions just as they reflect a nation’s accomplishments
in science and technology.
Negotiations within the international context are made all the more difficult by differences in culture, trade
customs, and legal order. Language barriers can complicate negotiations: Interpreters can slow the pace of
negotiations and/or take the unwanted active roles. There is substantial difference in bargaining style across
cultures,18 and in many cases “yes” and “no” do not mean what we understand these terms to be. For example,
the Chinese don’t like refusing your request, so instead of saying “no,” they use expressions like “no
problem” or “we’ll look into it.” Legal language, the sanctity of contracts, and even the validity of certain
clauses (e.g., the Arab boycott on doing business with Israel) are not irrevocable.19
The successful negotiator in international project management sees and understands the world as others do;
manages stress and copes with ambiguity; sells the merits of the proposal in meaningful terms that express
ideas clearly; and demonstrates cultural sensitivity and flexibility.20
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Title
Chapter 38
The Negotiation Differential for International Project
-----------
Management
M. Dean Martin
Western Carolina University
A closely related condition is what is commonly known as culture shock. This condition occurs because the
individual is away from the known and familiar and is faced with differing customs and ways of doing things.
Project managers should be concerned with getting the job done, rather than with trying to teach people how
to do the job their way. There is always more than one way to do a job.
Understanding these two conditions should enable project managers to develop an awareness of the need to
understand cultural differences and to permit the charting of a safe course through unknown waters. We now
turn to an examination of the seven elements of culture.
Material culture refers to the physical objects created by people or the results of technology.3 Each cultural
element is impacted and to an extent shaped by the other elements. Thus, the project manager planning a
technical approach to the construction of a bridge in a foreign country must take into account the types of
tools that are normally used and the construction techniques employed, as well as such factors as the skills of
local workers, their attitudes toward work and time, and their work habits. The manager needs to know this
information to plan for negotiations. To assume that the bridge will be built in a foreign country exactly as it
would be in the United States may be fallacious. Also, what is acceptable from a technological standpoint
may be impacted by religion, educational level, and a myriad of other factors. For example, the introduction
of television into Saudi Arabia in 1965 was permitted by the Ulema (an established group of theologians) only
after King Faisal convinced them that here was yet another tool to spread religious doctrine.4
Language
Language has been called a cultural mirror.5 To know the language of a culture is to know the people.
Language is the primary communications medium, but language can be tricky: Words or expressions in one
language do not mean the same in another. To assume an equality of meaning can lead to disaster for project
managers in negotiation meetings. Miracle and Albaum state that there is no substitute for learning a language
as a way to understand another person’s beliefs, way of life, and point of view.6 The importance of language
to a people is such that it behooves the project manager to try to learn the foreign language. Observation has
shown that the people of foreign countries appreciate the efforts of others to learn their language.
You may be corrected and receive quite a few smiles for your efforts, but the understanding and rapport that
often accrue are well worth the tedium.
The author once conducted a negotiation in Italy using a combination of gestures, French, English, and
Italian. The author knew English, French, and some Italian. The Italians knew Italian (of course), some
English, and some French. It was an interesting experience. The results turned out to be very satisfactory, and
the contract was completed without insurmountable problems.
If learning a foreign language is not an acceptable option, then translators can be used in an effective manner.
Regardless of the approach, language must be an important consideration for the project manager.
Esthetics
The art, music, dance, and other such customs of a foreign country do not directly influence the success of the
project in most cases. However, an appreciation of these features can enrich the time that the project manager
and project staff spend in a given country. Thus, while not critical, attending the theater in London or an opera
in Milan or visiting the Louvre in Paris may facilitate an awareness of language and the other cultural
elements. It often provides a topic of conversation with the foreign hosts and might even be useful to design
engineers planning a bridge or other structure.
Education
The cultural variable of education deals with the transmission of knowledge through the process of learning. It
determines in large measure how the people of a culture approach problems, how they relate to other peoples,
and how they approach and view foreigners. Some negotiators to Iran and other Arabic countries have
commented on the ability of the average Iranian or Arab to focus very effectively on the details, yet not be
able to conceptualize quickly the totality, of a project. Such knowledge can be beneficial in planning an
approach to negotiations with these individuals. Again, a knowledge of the educational system of a country
and the values that are transmitted by it can lead to a better understanding of that culture.
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Religion is often termed the mainspring of culture, influencing each of the other elements in a pervasive
manner. It affects dress and eating habits. For example, it is taboo to eat beef in India, and in Arab countries
women must wear a veil. The basis of both of these customs is to be found in religion.7 Religion can also
----------- influence the attitudes of workers to a work site. Construction on roads, dams, and other projects has often
been delayed because workers felt that some spirit inhabited the area. Only by working through local political
and religious leaders have such situations been resolved. In some cases roads have had to be rerouted at
increased cost as a consequence of this type of belief and the inability to resolve the problem quickly.
Religion also influences attitudes toward work and time. Pastner spent some time studying a Baluchi fishing
village in Pakistan.8 He found that problems arising in work situations often were ignored and not
immediately solved as the villages felt that the problems arose because of “God’s will.” If God wanted the
situation to be different, then it would not have happened. Since Pastner was not a believer, he often felt the
need to take action. When he did, he found his actions criticized and approved by different groups of
villagers, criticism being the majority reaction.
Studies by Hall indicate that different cultures have different attitudes toward time.9 In the United States,
promptness is valued and norms generally do not permit positive reactions to tardiness. On the other hand, in
some cultures, appointments cover a general time interval and do not denote a specific point in time. Foreign
managers thus often keep project managers waiting until they have finished the business at hand. The foreign
managers do this not to keep people waiting for the sake of waiting, but because they want to give the project
managers their undivided attention and cannot do so if they are distracted by unfinished business. The specific
time set for the appointment is of less importance.
There are countless illustrations that reflect the differences in values caused by religion, beliefs, and attitudes.
The important point is that the project manager should be aware that culture can and does affect these critical
variables and that an understanding of this fact is required to communicate effectively with individuals for
negotiation and management purposes.
Social Organization
This cultural element deals with the organization of individuals into groups and the structure of activities by
these groups to accomplish goals and objectives. The family is one such group. Family relationships can
affect attitudes toward business and, as such, negotiations. The individual in his or her culture is also a
member of many other groups, including labor unions, social clubs, and other societal reference groups that
influence attitudes and values. Social organization also relates to social classes in a society. In the United
States there are social classes but they are not always clear-cut. In some countries, however, social mobility is
not as prevalent as in the United States. This type of stratification places limits on who can negotiate and deal
with whom. The Simmons Company found its entry into the Japanese bed market hindered because it hired
salespeople of a certain class and had them trying to call on managers of a higher class.10
A knowledge of social organization permits the project manager to be more productive in terms of business
contacts and time scheduling and provides an understanding of the formal versus the informal in terms of how
to conduct negotiations. During one two-week negotiation in Paris, the author encountered extreme difficulty
making progress in negotiations during the day at formal meetings. However, evenings at cocktail and dinner
functions were highly productive and permitted a tough negotiation finally to be completed.
Political Life
Most foreign governments get involved in the business dealings of their companies and nationals with foreign
companies entering their market. This seems to be even more prevalent with the growth of multinational
corporations.11 The foreign government in many cases wants to influence the way the project is to be
performed. The government’s concerns relate to the treatment of its people by the foreign company, the
number of jobs created, the magnitude and scope of financial transactions, safety considerations, the amount
of profit the foreign company is making, and a host of other factors. By its actions the government can delay
the importation of equipment, materials, and supplies; can approve or disapprove the issuance of certain
licenses and permits; or can in various ways make the project manager’s job extremely difficult. Often, the
question of ethics arises in terms of whether or not to bribe local officials.
In some cases the foreign government wants to have a representative at the negotiation meeting, depending on
factors that include the nature of the contemplated work, the magnitude of the dollars involved, the level of
technology involved, and the level of government support that will be required. Thus, one can again see the
impact of culture on negotiations.
The prenegotiation planning phase involves a problem-solving mode. The project manager has a requirement
that needs action. For example, he or she may be bidding on the construction of a road, bridge, or dam in a
foreign country. He or she knows the product, the company capabilities, and the other factors that the
company will bring to the negotiation table. The need is for a plan that delineates the manager’s approach to
the negotiations. The project manager needs to know his or her opponent and that person’s environment to
develop a contingency plan; to decide on whether to take an individual or team approach; to designate a team
leader; to develop strategies and tactics; to develop cost, schedule, and performance objectives—both
minimums and maximums; and to identify give and take points.
The first step is to perform a thorough cultural analysis of the country where the project is to be activated.
This analysis should include data relative to the seven cultural elements previously discussed. The author had
the occasion to talk to an individual who had gone to China in the 1970s on the first U.S. trade mission to that
country since the revolution in 1949. He confided that he was amazed at how well prepared the Chinese
negotiators were. They possessed many details about his company and his family and were very
knowledgeable about the costs involved in his line of work. He, however, did not know the same about them
and was in general unprepared for the negotiation in terms of cultural knowledge. The end result was that he
found himself in the position where it was impossible to negotiate terms and conditions of sale that were
acceptable to his management. Hall states that many of our difficulties in dealing with the Chinese is our lack
of understanding of the difference between our two cultures13—something that is crucial in conducting
successful negotiations.
Exhibit 38-1. The negotiation process.
Prenegotiation Planning ’ Negotiation Meeting ’ Postnegotiation Critique
The information for the cultural analysis can be obtained by personal observation (a visit to the area), by
conducting studies and surveys in the country (an approach that is often not practical), and by reference to
secondary data sources, such as reports and government studies. After the information is gathered, it should
be analyzed and evaluated. The arrayed information then forms the basis for the preparation of the plan
described above. The risk in the situation needs to be assessed and should form the basis for the formulation
of detailed strategies and tactics.* Strategies relate to cost, schedule, and performance variables, whereas
tactics relate to the actual negotiation meeting and how the negotiator should react to and deal with the
opponent.14
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All the planning, analysis, and evaluation culminates with the negotiation meeting. The meeting involves five
distinct stages:
1. Protocol
-----------
2. Probing
3. Tough bargaining
4. Closure
5. Agreement
The first stage involves protocol considerations. The length of this stage depends on the participants. It is
during this stage that the participants get acquainted, decide on the type of table and the seating arrangements,
and so on. The cultural analysis by the project manager and project staff provides the information as to how
the protocol stage should be approached. Generally speaking, it is best to let the meeting evolve and not try to
rush things.
The second stage is that of probing. It is during this stage that the two sides actually start communicating with
one another. Eye contact, voice tone, gestures, posture, and other actions become meaningful. Verbal
communication is the obvious dimension for the meeting.15 The individual needs to exude confidence and to
speak with fluidity.
The other dimension in the meeting is the nonverbal aspect of communication, sometimes called body
language. One aspect, eye contact, is important to convey your message.16 It tells your opponent that you are
attentive and in control of the situation. However, Hall states that your eyes can betray you.17 Studies have
shown that the pupil of the eye is a very sensitive indicator of how people respond to a situation. When an
individual is interested in something, the pupil dilates, and when a person dislikes something that is said, the
pupil contracts. Hall then describes how Arabs use this information to read mood changes in their opponents.
They also try to deny this information to their opponents by wearing dark glasses, even indoors. In addition to
factors relating to the eyes, managers should know that Arabs have a different concept of body space than
Americans. They have a tendency to sit close to those they are negotiating with and at times to place their
hand on their opponent’s knee or leg—something that a person from a culture with a different concept of body
space can find quite disconcerting. Regardless, the probing stage involves the two sides feeling each other out,
hopefully to identify weaknesses, areas of interest, or urgency. It is a time for validating the adequacy of one’s
strategy or for falling back on contingency plans that have been developed.
*C. L. Karrass includes an excellent discussion of the various strategies and tactics in his book The Negotiation Game (New
York: World Publishing, 1970). This area is also covered quite well in N. W. Beckmann, Negotiations (Lexington, Mass.: D. C.
Heath, 1977).
The third stage is that of rough bargaining. This means knowing the points that you must take and going after
them with confidence and decisiveness. This approach has been validated by studies as being the most
successful one in negotiations.18
At some point, the key issues of cost, schedule, and performance are pretty well settled; this marks the entry
to stage four: closure. This stage generally involves a summary of the agreements reached on individual
issues. When this has been completed without objections, then stage five, agreement, has been reached. This
stage is characterized by discussions relative to when the work should actually start and a consideration of
other side issues, including when you hope to meet again. This is a good time to review key phrases that are to
be included in the contract, as different words have different meanings for different people, and the
communication that you thought existed may not have been effective.19 Not surprisingly, negotiations have on
occasion been reopened at this point. A key consideration is to permit your opponent to save face (this is
assuming you won). Face as a concept is most aptly illustrated by the Arabs20 as involving a perception that
relates to an individual’s value of self-worth. For negotiation, it means that both sides were “winners.” (Your
side just won more.)
This phase of negotiation provides feedback as to how well the project manager did in planning.21 It reveals
what facts were needed that were not available. During this phase the agreement is generally reduced to
writing. This recording of the agreement may take the form of a contract or a memorandum;22 the mode of
recording depends in large measure on the country involved. In order to fix the country whose laws will
govern, the project manager should ensure that a jurisdiction clause is included.
As a general rule, it is not good practice to discuss the course of the negotiation at this point with your key
adversary and his or her staff. You may want to negotiate with them again and there is no need to risk some
chance remark that might antagonize the other side.
Notes
1. V. Terpstra, International Marketing (Hinsdale, Ill.: Dryden, 1972), p. 83.
2. R. Kahler and R. L. Kramer, International Marketing, 4th ed. (Dallas: South-Western Publishing,
1977), p. 123.
3. V. Terpstra, The Cultural Environment of International Business (Dallas: South-Western Publishing,
1978), p. 176.
4. P A. Iseman, “The Arabian Ethos,” Harper’s (February 1978), p. 55.
5. Terpstra, The Cultural Environment of International Business. p. 2.
6. G. E. Miracle and G. S. Albaum, International Marketing Management (Homewood, Ill.: Richard D.
Irwin, 1970), pp. 8-9.
7. E. W. Fernea and R. A. Fernea, “A Look Behind the Veil,” Human Nature 2, No. 1 (January 1979),
p. 68.
8. S. Pastner, “A Nudge From the Hand of God,” Natural History 87, No. 3 (March 1978), pp. 32-36.
9. E. T. Hall, The Silent Language (Greenwich, Conn.: Fawcett, 1959), pp. 128-145.
10. D. A. Ricks, M. Y. C. Fu, and J. S. Arpan, International Business Blunders (Columbus, Ohio: Grid,
1974), pp. 20-22.
11. L. T. Wells, Jr., “Negotiating With Third World Governments,” Harvard Business Review 55, No.
1 (January-February 1977), pp. 72-80.
12. P. R. Cateora and J. M. Hess, International Marketing, 4th ed. (Homewood, Ill.: Richard D. Irwin,
1979), pp. 134-135.
13. E. T. Hall, “How Cultures Collide,” Psychology Today (July 1976), p. 66.
14. J. R. Adams, S. E. Barndt, and M. D. Martin, “Planning for the Project,” in Managing by Project
Management (Dayton, Ohio: U.T.C., 1979), pp. 64-73.
15. J. A. Hall et al., “Decoding Wordless Messages,” Human Nature 1, No. 5 (May 1978), pp. 70-72.
16. J. Fast, Body Language (New York: Pocket Books, 1971); D. Goleman, “People Who Read
People,” Psychology Today (July 1979), pp. 66-78.
17. E. T. Hall, “Learning the Arabs’ Silent Language,” Psychology Today (August 1979), p. 45.
18. “Show You’re Tough, Then Ask the Price,” Psychology Today (October 1979), p. 116.
19. R. Plutchik, “A Language for the Emotions,” Psychology Today (February 1980), p. 71.
20. Iseman, pp. 43-44.
21. Harold Kerzner, Project Management: A Systems Approach to Planning, Scheduling, and
Controlling (New York: Van Nostrand Reinhold, 1989), p. 168.
22. T. A. Warschaw, Winning by Negotiation (New York: McGraw-Hill, 1980), p. 266.
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Title
Chapter 39
Challenges in Managing International Projects
----------- Paul C. Dinsmore
Dinsmore Associates
Manuel M. Benitez Codas
M. M. Benitez Codas
A backhanded “V for Victory” sign is an uncomplimentary gesture in Australia. In Brazil, the American
“A-OK” sign is also offensive. These are lessons that presidents, diplomats, and businesspeople have learned
the hard way. Awareness of such cross-cultural subtleties can spell success or failure in international dealings,
whether in diplomatic relations, general business, or the project arena.
Projects conducted in international settings share these sometimes embarrassing communications pitfalls and
others as well. They are subject to cultural, bureaucratic, and logistical challenges just like conventional
domestic projects are. In fact, project management approaches to international ventures include the same
items common to domestic projects. Under both circumstances, successful project management calls for
performing the basics of planning, organizing, and controlling. This also implies carrying out the classic
functions outlined in the Project Management Institute’s Project Management Body of Knowledge (PMBOK)
of managing scope, schedule, cost, quality, communications, human resources, contracting and supply, and
risk.
The primary factors in cross-cultural settings that call for special attention and an “international approach”
are: functional redundancy, political factors, the expatriate way of life, language and culture, additional risk
factors, supply difficulties, and local laws and legislation. Of the items pinpointed, some offer particular
challenges from the viewpoint of the PMBOK. Some comments on these critical topics follow. These are the
subjects that require special care to ensure that the internationally set project meets its targeted goals.
• Functional redundancy means the duplication or overlap of certain functions or activities. This may
be necessary because of contractual agreements involving technology transfer requiring “national
counterparts.” Language or organizational complexity of the project may also be responsible for
creating functional redundancy. Special attention is called for, therefore, in managing the project
functions of human resources and communications.
• Political factors in international projects are a strong influence and are plagued with countless
unknowns. Aside from fluctuations in international politics, project professionals are faced with the
subtleties of local politics, which often place major roadblocks in the pathway of attaining project
success. In terms of classic project management, this means reinforcing the communications function in
order to ensure that all strategic and politically related interactions are appropriately transmitted and
deciphered.
• The expatriate way of life refers to the habits and expectations of those parties who are transferred to
the host country. This includes the way of thinking and the physical and psychological needs of those
people temporarily living in a strange land with different customs and ways of life. When the
differences are substantial, this means making special provision for a group of people who would
otherwise refuse to relocate to the site, or, if transferred on a temporary basis, remain highly
unmotivated during their stay. The basic project management factors related to the expatriate way of
life include communications, human resources, and supply.
• Language and culture include the system of spoken, written, and other social forms of
communication. Included in language and culture are the systems of codification and decodification of
thoughts, beliefs, and values common to a given people. Here all the subtleties of communications
become of special importance.
• Additional risk factors may include personal risks such as kidnapping, local epidemics, and faulty
medical care. Rapid swings in political and economic situations, or peculiar local weather or geology,
are also potential uncertainties. These different risk factors require analysis and subsequent
management to keep them from adversely affecting the project. The obvious basic project management
tenet in this case is risk management.
• Supply difficulties encompass all the contracting, procurement, and logistical challenges that must be
faced on the project. For instance, some railroad projects must use the new railway itself as the primary
form of transportation for supplies. In other situations, waterways may be the only access. Customs
presents major problems in many project settings. A new concept in logistics may need to be pioneered
for a given project. Contracting and supply on international projects normally calls for an “overkill”
effort, since ordinary domestic approaches are normally inadequate. This usually requires highly
qualified personnel and some partially redundant management systems heavily laced with follow-up
procedures. Heavy emphasis is needed in the areas of contracting and supply.
• Local laws and legislation affect the way much of business is done on international projects. They
may even affect personal habits (such as abstaining from drinking alcoholic beverages in Muslim
countries). Here the key is awareness and education so that each person is familiar with whatever laws
are applicable to his or her area. In this case, the project management tenets that require special
attention are communications and supply.
It is apparent from Exhibit 39-1 that in terms of classic project management, special emphasis is required on
international projects in the areas of communications, contracting and supply, human resources, and risk.
Since all of the project management areas—including the basic areas of managing scope, schedule, cost, and
quality—are interconnected (a communications breakdown can affect quality, for instance), extra diligence is
called for in managing communications, contracting and supply, human resources, and risk. It must be
assumed that a conventional approach to managing these areas will be inadequate for international projects.
Exhibit 39-1. Relationship of internationally sensitive factors to the basic concepts of the PMBOK.
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reserved. Reproduction whole or in part in any form or medium without express written permission of
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AMA Handbook of Project Management, The
by Paul C. Dinsmore
AMACOM Books
ISBN: 0814401066 Pub Date: 01/01/93
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reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
AMA Handbook of Project Management, The
by Paul C. Dinsmore
AMACOM Books
ISBN: 0814401066 Pub Date: 01/01/93
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Bibliography
Casse, Pierre. Training for the Multicultural Manager. Washington, D.C.: SIETAR, 1982.
Halpin, Daniel W. “The International Challenge in Design and Construction.” Construction Business Review
Magazine (January-February 1992).
Seaden, George. “The International Transfer of Building.” Construction Business Review Magazine
(January-February 1992).
Use of this site is subject to certain Terms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights
reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
AMA Handbook of Project Management, The
by Paul C. Dinsmore
AMACOM Books
ISBN: 0814401066 Pub Date: 01/01/93
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Title
Index
[page numbers in italics refer to exhibits]
acceleration claims, 342-343
-----------
accountability, 86, 251
acquisition strategy, 323-326
acronyms, 179
activity identification code, 64-65
activity planning, 309
actual acceleration, 342
actual cost of work performed (ACWP), 179
actuals, 197
adjourning stage, for team building, 226
administration, 159
interface with engineers, 323-330
policies, 95
aerospace industry, 5
agreement, negotiated, 455
analysis phase, for software, 363-365, 367
Apollo program, 41
application specific integrated circuits, 436
artificial intelligence, 127, 130
assembly line, 10
assigned power, 384
assignment modeling, 127
assignment scheduling, 124, 127
Association of Project Managers, 50
body of knowledge, 51-52
assumptions, 55, 145, 147
attitudes, 39, 46, 451-452
and project success, 97
audits, postimplementation, 319
authority, 149, 230, 243, 251, 316
in international projects, 442, 444
of project manager, 82, 92
authorization for work, 158, 183-184
feasibility activity, 417-418
authorized work package, 182
auto makers, 23
autonomy, 82, 102
decision model, 105, 107
avoidance of risk, 15
bar chart, 152
for planning, 122, 124, 125
resources, 128
task summary, 129
bargaining, 232
baseline, 162
basic function, 199
behavior, 21
changing, 311-312
defining new, 315
of knowledge workers, 398-403
and project success, 97
teaching, 316-318
top management, 318-319
beliefs, 451-452
beta (±) distribution, 373
beta test software, 283
bidding
competitive, 47
design professionals and, 333
body of knowledge
Association of Project Managers, 51-52
industry/technology, 34-35
management, 29
shared domain, 35
see also The Project Management Body of Knowledge
body language, 454-455
budgeted cost of work performed (BCWP), 180, 189
budgeted cost of work scheduled (BCWS), 178, 189
budgets, 13, 22, 153, 197
constraints, 99-100
cost/schedule control system criteria and, 185-186
for development, 413
objectives, 56
undistributed, 186
work structuring and, 133
bureaucracy
and change, 297-300
changing to project management culture, 311-319
problems of, 313
business influence, and work structure, 137
business management, factors in success, 134
business trends, and information system projects, 353-354
cash flow management, 153
cause-and-effect diagram, 266
certification process, 50
chain of command, 86
champions, 48, 208
change, 5, 250, 304-306
control, 159, 183-184
implementing, 295-297
individual response to, 295-297
organizational flow of, 301
in organizational structure, 111-112, 311-313
planning for, 304-310
process, 293-303
in project management, 300-303
resistance to, 83
sources, 305-306
in technology, 42, 434
charisma, 384
claims avoidance, 331-335
clients, see customers
closeout phase, 334
closure stage, in negotiations, 455
coaching, 230
code generators, 367
codes, 146
coding software, 366, 367
coding system, 121
coercive power, 244, 384
collaboration, 232
college offer, 398, 399
commitment, 46, 255, 256
communications, 25-26, 48, 134, 149, 250, 281, 298, 332
international, 442-443, 446
management, 16, 33
community participants, as stakeholders, 209-210
community support, 43
competence, 86, 239
competition
in bidding, 47
worldwide, 424-425
components of projects, 6
and integration, 98
computer systems, 49, 282-283, 354
cost accounting, 170
for cost/schedule control system criteria, 191
concurrency situation, 45
configuration management, 161-162
conflict, 20-21, 26, 48, 95-96
from project organization, 89
interpersonal, 231-232
in plans, 75
and project resources, 7
connections, 245
connective power, 384
consensus, 16, 228
constraints, 55, 56, 146
construction, 5
construction claims, 336-343
construction phase
design professionals and, 333-334
for software, 366
Construction Specifications Institute, Masterformat, 168
constructive acceleration, 342
consultants, 332
contacts, 39
contingency plans, 15, 394
continuing engineering, 419
continuous flow process, 10
and costs, 11
contracting plan, 22
contractor’s damages, 341-342
contracts, 270-287, 325
documents, 336-337
management, 16, 33, 331
strategy, 47
summary of, 273
types, 271-272
control, 21, 132, 242, 243
of costs, 15, see also cost control systems
international projects, 443
by management, 250
in start-up, 48-49
in time management, 15
control chart, 262-263
control management, 33
cooperation, 87
core team, 319
corporate culture, 238
cost, 49
for life cycle of project, 7
cost accounting, 55, 182
computer systems, 170
structure, 67
cost account manager, 177
cost account schedules, 185
cost accumulation, 186-187
cost budgeting, 15
cost control systems, 15, 167-176
corrective action based on, 174-175
elements, 175
establishing baseline, 167-170
status reports, 172, 173, 174
success of, 175-176
cost estimates, 152, 178, 328, 333
risk analysis and, 154
sensitivity analysis of, 155
cost-function relationship, 200
cost management, 15, 33, 197
cost objectives, 87
cost overruns, correcting, 198
cost performance report, 191
costs
data collection, 170
of R&D, 395
reducing, 427-428, 435-436
cost/schedule control system criteria, 177-196
benefits and limits, 180, 181
critical data elements, 178-180
data illustration, 193
history, 178
process description, 182-191
cost-schedule graph, 174
cost variance, 187
countermeasures, 266
CPM (critical path method), 12
craft, 9
and costs, 11
creative discontent, 201, 202
creativity sessions, 228
critical path method (CPM), 12, 121-122, 127
and estimating, 396
cross-functional teams, 430
location of, 430-431
success of, 428, 431
culture, 444-445, 449-450, 458
developing project, 462-463
elements of, 450-453
integrating, 461-462
and negotiation, 453-455
of organization, 96
culture shock, 450
customers, 261-262
analyzing services for, 49
relations, 286, 352
as stakeholder, 25-26
customer satisfaction, 267, 279, 431
damages, 340-342
data, for success analysis, 220
decision model, 228
autonomy, 105, 107
organizational choice, 84
decisions, 100
decision table, project organization choice, 101, 104-108
definition of project, 39, 40-42
delays, 337
avoiding in development, 420-421
entitlement and, 338-339
delegation, 444
Deming Wheel, 266
Department of Defense, 178
department managers, see functional managers
dependency, 99
design, 11, 39, 435-436
technologies and, 41-42
design phase, 413
design professional and, 332-333
for software, 365-366
design professionals, 331
see also engineers
detail
in cost control system, 168
in planning, 76
development, 363, 403
flow cycle, 390
redundant paths, 383
shortening cycle, 434-435
see also new product development; research & development
direct costs, 187
discrete effort, 184
distributed processing, 354
documentation
control, 159
and delays, 339-340
storage and access, 160-161
of work process, 262
writing, 26
document management, 160-161
domain of study, 363, 368
downsizing, 109
duration of project, 39, 44-46
earned value, 171-172
see also cost/schedule control system criteria
economic factors, 42-44
education, 451
educational institutions, 50, 52
Eichlaey formula, 342
emergency preparedness plan, 156
emotions, 302
and change, 296, 297
end products, 146
end users, as stakeholder, 25-26
engineers, 323
administrator interface, 323-330
program control by, 326
English Channel Tunnel, 44
entitlement, 338-340
environmental complexity, 99, 104, 106
environmental factors, 42-44
environmental impact assessment, 44
environmental screening, 308-309
equipment
procurement, 151
for R&D, 394
ESA Report, 33
esthetics, 451
estimating
costs, 15
for R&D, 395
in software industry, 372-373
in time management, 15
European model, 460-461
executive, as project manager, 20-24
expatriate way of life, 458
experts, 238
and power, 244, 384
external customers, 261
external design of software system, 365-366
external factors, 39, 42-44
eye contact, 454-455
facilitator, 75
facilities requirements, 146
family, 452
“fast build” practice, 45
feasibility, 11, 410
feasibility activity, 419
authorization for, 417-418
finance, 44
financial management, 153
financing, 39
firefighting, 264
fixed price contracts, 286
flat flexible structures, 109-113
change to, 111-112
defining, 110
vs. matrix organization, 110
forcing, 232
forming stage, for team building, 226
framework, for project, 61, 63-68
fully projected organization
structure, 89-90
characteristics, 90
function, 199
functional managers
conflict with project managers, 95-96
reaction to autonomous project, 82-83
role in matrix structure, 60
as stakeholders, 26
functional and operational requirements, 146
functional organization structure, 85-89, 88, 102
functional redundancy, 457
function analysis system technique (FAST) diagram, 199, 200
funding profile, 325-326
funds control system, 186
game, 227
Gantt chart, 122
General Electric study, 198
globalization, 460-461
goals, 18, 294
group decision making, 444
group memory, 75
Handbook of Project Start-Up, 71
hard activities, in success process, 213, 214
hidden agenda, in team planning, 78
hostility, 99
human resources management, 33
human subsystems, in international projects, 445-446
ideas, and new products, 408
image, 255
implementation, 46-49
inch-pebbles, 368-372
indirect costs, 187
industry body of knowledge, 34-35
influence, 316
defining, 242
of project manager, 251
sources, 241-246
influence management, 232-233
information, 100, 257, 268
and power, 245, 384
reporting, see communications security, 157
sharing, 73, 253, 285
validity, 167
vertical movement, 86
information media, 210
information R&D projects, 389
information systems, 94-95
for international projects, 442-443, 447
information systems projects, 353-361
business trends and, 353-354
differences from other projects, 358-361
life cycle in, 356-357
management functions, 357-358
organization structure, 359-361
technology and, 354-355
in-house reporting, 191
initiation techniques, 55-70
inner group leaders, 227
innovation, 45, 98, 104
evaluating options, 425-428
inspirational leadership, 245
installation, of software, 366
integrated circuits, application specific, 436
integrated management, 430
integrated product development, 427-428
integration, 12-13, 49-50, 97, 104
need for, 98-99
of project, 82-84
of project into functional structure, 87
project manager and, 75
resource sharing and, 94
work structure and, 140-141
interactive network drawing, 121-122
interdependence, 98, 245
interface events, 76
interfaces, 20, 149
internal audit, 191
internal customers, 261
internal design of software, 366
international projects, 441-447, 457-464
communications and information systems, 442-443
control systems, 443
human subsystems in, 445-446
organization, 444
techniques, 443-444
INTERNET (International Association of Project Management), 50
Committee on Project Start-Up, 71
interpersonal relations, 231-233, 250
intuition, 21
inventions, 421
involvement, 227-228, 255
islands of operations, 298, 299
Japanese model, 461
job cost accounting, 170
job satisfaction, 249
job security, 250
job shop, 9
joint ventures, 408
kanban operations, 10
knowledge workers’ behavior, 398-403
labor costs, 186
language, 450-451, 458
lateral relations, 86
lawsuits, 331
leadership, 242, 243, 249, 255, 316
and change, 302
effectiveness, 252-253
in projects, 48
for research & development, 383-385, 422-423
leaders of team, 216
lectures, 230
legitimate power, 244
level of effort, 184, 189
level-of-effort contracts, 286
licensing, 408
life cycle of product, cost, 7
life cycle of project, culture over, 463-464
line managers, role in matrix structure, 60
liquidated damages, 340
listening, 231
location, for team planning meeting, 73-75
logical network plans, 152
logic check, 196
logic flow diagrams, for research & development, 390
logic and schedules, 151-152
logistics, 150-151
long-range planning, 306
long shots, 426-427
macro environment, 308
maintenance, 418, 419, 423
management, see also administrators; project manager; top management
management by fact, 268
management by projects, reasons for use, 35
management plans, 157-158
management reserves, 186
management skills, for R&D workers, 401
management systems, inadequacy, 94-96
managerial emphasis, 9
managers, see also functional managers manufacturing, 423
manufacturing cells, 10
marketing life cycle, 8
market survey, 43
master schedule, 22, 76
material, for R&D, 394
material cost collection accounting, 186
material culture, 450
materials, 458
procurement, 151
material variances, 194
matrix
document responsibility, 160
responsibility assignment, 184
matrix organization, 59-60, 90-92, 101-102
vs. flat flexible structure, 110
implementing, 46
and management style, 252
and power, 250
maturing of project team, 219
measurement, of project success, 219-222
meetings, 159
Merck & Co., 378-379
micro environment, 308
milestones, 152, 326
for software development, 368, 369
milestone schedules, 55, 63, 65, 67, 68, 69
by owners, 47
mission and objectives, 144-145
modeling
decision-making, 228
organizational change, 311-313
problem solving, 265-266
project management, 211
project success, 210-215
strategic planning process, 307
moderator, 75
motivation, 227, 248-250, 401, 445
multidisciplinary projects, 89
multifunctional triad, 422-423
negotiation, 232, 329, 332
culture and, 453-455
design professionals and, 333
international, 446
protocol in, 454
network diagram, 6-7
precedence format, 123
for research & development, 390
networks, 122, 151-152
new product development, 407-423
avoiding delays, 420-421
evaluating options, 425-428
external sources for, 408
phased approaches, 408-422
speed, 425
unstructured approaches, 407-408
nonexcusable delay, 338-339
norming stage, for team building, 226
North American model, 461
notification requirement, for entitlement, 339
number system, accounting charge, 121, 186-187
objectives, 33, 39, 41, 87, 144-145, 250, 254
identifying, 55, 56
of R&D, 392
objects, and work structure, 137
operational planning, 309
operations management, 12
optimization phase, 413, 418, 423
order award, 330
organic structures, 93
organization, 46-47, 59-60
culture, 96
power dynamics in, 246
organizational breakdown structures, 55, 63, 65
organizational change
model, 311-313, 312
top management and, 318
organizational culture, 58-59
organization chart, 60
organization demand, 398, 400-401
organization development, 148-149
organization structure, 81-108
autonomous projects, 82
choosing, 100-108
contextual factors, 93-96
decision table for choosing, 101, 104-108
existing structure, 85-93
fully projectized, 89-90
functional structure, 85-89
for information system project, 359-361
integration, 82-84
international projects, 444
project factors and, 96-100
in project management plan, 148
and research & development, 391, 434-435
outlining, for planning, 119-120
overhead costs, contractor recovery, 342
owners, 57
damages, 340-341
involvement, 46-47
paperwork, 180
paradigm, 118
parasitic participants, 210
Pareto charts, 266
Pareto’s Law, 168
participants, as stakeholders, 208
participative planning, 23
partitioning analysis, 364
partnering, 460
people issues, 47-48
performance evaluation, 59-60, 280
performance measurement, 67, 187-188
baseline, 185, 186
of costs and scheduling, 158-159
indexes, 193
work structuring and, 133
performing stage, for team building, 226
personnel development, 149
personnel policies, 95
persuasion, 245
PERT, 17, 372
pharmaceutical industry, 5
phased approaches to new product development, 408-422
overview, 413, 414-416, 417-419
reasons for, 410-413
schedule compression, 421-422
phase transition workshop, 72
Plan, Do, Check, Act (PDCA) cycle, 266-268
planned work packages, 183, 186
planning, 21-22, 55, 250
bar chart for, 122, 124, 125
for change, 304-310
in cost/schedule control system criteria, 184
detailed, 76
facilitator, 75
interactive network drawing for, 121-122
international projects, 441-442
management, 33
paradigms for, 117-130
process of, 23-24
project team, 71-78, 227
start-up, 48-49
task, 118-124
and team effectiveness, 255
in time management, 15
work breakdown structure for, 120-121
work structure, 131-132, 133
policies, administrative, 95
political factors, 42-44, 458
political life, 452-453
politics, 237-240, 243
postconstruction phase, design professional and, 334
postimplementation audits, 319
power, 237-240
and actions, 246, 246
definitions, 241-243
and project leaders, 384
sources, 244-246
power spectrum, 250-252
preanalysis phase, 363-364
precedence diagramming, 22
prenegotiation planning phase, culture and, 453-454
preparation, for team planning session, 72
preproduction phase, 413, 418
preprofessional service contract phase, 332
principled negotiation, 232
private sector funding, 44
probing stage, in negotiations, 454
problem avoidance, 256
problem definition, 265
problem solving, 249-250, 263, 265-266, 297
structured, 200-201
procedures, administrative, 95
process, 262-265
process control, 265
process indicators, 262, 265, 265
procurement and logistics, 150-151
procurement management, 16, 33
procurement plan, 324
procurement policy, 95
product, analysis of, 201
production, 8, 413
productivity, 224, 367
improvement, 48, 155-156
product-oriented R&D projects, 389
product of project, 7
products, extending life, 437
professional growth, 249
professional needs, of team personnel, 249
professionals, 399
program, control by engineer, 326
program plan, engineer and, 329-330
progressive line process, 10
project . . . , see also remaining portion of term
project activity list, 385
project breakdown structure, 22, 77
see also work breakdown structure
project conditioning, 218-219
project control, 158-159
project deliverables, 146
projectized organization structure, 89-90, 101
project life cycle, 24, 31
project management, 159
as career, 11-12
changing bureaucracy to, 311-319
concept origins, xvii
culture development, 315-319
factors in success, 135
functions, 12-16
and goals, 294
The Project Management Body of Knowledge, 6, 28-35, 457
basic PM functions, 32-33
framework, 31
integrative PM functions, 33-34
structure, 30-34
project management council, 26-27
project management model, 211
project management plan, 143-163
appendix, 162-163
cost estimates, budgets, financial management, 152-153
documentation and configuration management, 159-162
environmental, safety, and health, 156
introduction/overview, 144
logic and schedules, 151-152
mission and objectives, 144-145
organization development, 148-149
planning basis, 145-147
planning, control, administration, 157-159
procurement and logistics, 150-151
quality and productivity plan, 154-156
resource plan, 149-150
risk analysis and contingency plan, 153-154
security, 156-157
work breakdown structure, 147-148
work scope, 145
project management services
quality of, 273
sellers, 272
project manager, 48, 315
conflict with functional departments, 95-96
and development cycle, 434
executive as, 20-24
influence of, 251
as integrator, 132-133
in matrix structure, 92
power spectrum, 253
for R&D project, 391
responsibility, 238-239
role in team planning, 75-76
selection and organization structure, 102-103
and sponsor, 25
project planning, 22, 56
steps, 348
and strategic planning, 309
projects, 9
characteristics, 6-9
defining, 5-6, 131
examples of, 18
multidisciplinary, 89
phases of, 332-334
size of, 97-98
project success scenarios, 214
project team, 20
barriers and drivers to performance, 254
cross-functional, 428
identifying key members, 72-73
management issues, 249, 253-256
member survey, 228, 229
role, 60-61
in strategic planning, 58
structure, 255-256
see also team work
project team building, 207-222, 217, 256, 257
intercultural, 459-460
rules, 226-227
stages, 225-226
project team planning, 71-78
benefits and limitations, 78
conducting session, 77
example, 76-78
project manager’s role, 75-76
property protection, 157
proposal evaluation, 328-330
protocol, in negotiations, 454
prototyping, 45
public sector funding, 44
punctuality, 442
punishment, 244
quality
criteria for measuring, 285
definition, 279
objectives, 87
of project management services, 273
in software, 352, 366-367
quality assurance, 155
quality indicators, 262, 265, 265
quality management, 14, 33, 155, 261-268
quality and productivity plan, 154-156
range estimating, for R&D, 395
realization, 39
recall trigger, 73
recorder, 75
records, 249
redundancy, 383, 457
in research projects, 394
referent power, 244
relay race approach, to new product development, 409, 421-422
religion, 451-452
replanning, 371-372
reporting, 159, 283
in cost/schedule control system criteria, 190-191
relationships in matrix organization, 92, 93
reprimands, 303
request for proposal, 327-328
requirements, 146, 273
of customers, 261-262
research & development, 7, 377-386
application considerations, 389-392
effectiveness measurement, 383
knowledge workers’ behavior, 398-403
management problems, 402
planning software for, 385-386
project leadership, 383-385
project life cycle, 388-389, 390
risk and uncertainty, 382-383, 388-397
selecting projects for, 386
standard timetable, 380-382
technical objectives, 392
types of projects, 402-403
research-oriented projects, 402-403
resource histogram, 124, 126
resource loading, stability, 100, 106
resources, 7, 67-68
allocation, 13-14
availability, 94
bar chart, 128
estimating for software project, 350-351
leveling, 124
management, 33
planning, 124, 127, 130
project manager control over, 103
respect, 268
responsibility assignment matrix, 184
response planning, 15
response policies, 218
responsibility, 133, 137
in project management plan, 148
rewards, 244, 303, 384
risk, 44, 411-412, 458
in concurrency, 45
organizational, 97
in research & development, 388-397, 436
risk analysis, 42
in project management plan, 153-154
in software project management, 351
risk management, 15-16, 33
in research & development, 382-383
role definition, 250
root cause analysis, 266
roundtable discussions, 230
safety and health projection plan, 156
schedules, 151-152, 284
of assignments, 124, 127
compressing for new product development, 421-422
in cost/schedule control system criteria, 184
software for, 12
summary, 152
in time management, 15
work structuring and, 133
schedule variance, 187
scope of work, 278
defining in information systems project, 358
limiting, 147
management, 14, 33, 63
objectives, 56
for R&D, 392-393
software system, 368
total project, 138
security, 156-157
for documents, 161
self-reference criterion, 449-450
seminars, 230
senior management, see top management
sensitivity analysis, 155
Shewhart Cycle, 266
simulation, 316-318, 317
simultaneous planning, 23
size of project, 97-98
SmithKline Beecham, 379-380
smoothing, 232
smuggled project, 400
socializing, 442
social organization, 452
soft activities, in success process, 213, 214
software, 118
beta test, 283
construction phase, 366
installation, 366
management, 67-68
quality of, 366-367
for research & development planning, 385-386
for telecommunications, 437
software engineering, 362-373
software project management, 347-352
development phases, 363
difficulty of managing phases, 368-369
measuring completion, 349
quality control in, 352
risk analysis in, 351
scheduling, 351-352
see also tasks in software projects
source selection plan, 324-325
specialized department, 86
specifications, 261
in new product development, 420
spend plan, 178
sponsors, 25, 48, 57, 238, 239-240
stability, 295-296
staffing, 255, 277, 278
stakeholders, 20, 25-27, 57, 208-210
analysis, 59
identifying, 55, 209
identifying success goals of, 212
study of, 212
success grid, 212-213
standardization, 266
standards, 146
starting, see initiation techniques
start-up meetings, 48, 49, 71-72
meeting room for, 73-75
statement of work, 135, 141
statistical tools, 265
for software projects, 372
steering committee, 26-27, 238
storming stage, for team building, 226
strategic importance, of project, 97
strategic model, 39, 40
strategic planning, 13, 20
and change, 302
key steps, 307
process, 306-309
and project planning, 309
strategies, 39-53, 146-147
contracts, 47
developing, 57-58
subproject, 61
structured problem solving, 200-201
study phase, design professional and, 332-333
Style II management, 252
subcontracting plans, 150-151
subcontract management/control, 159
success
of cost control systems, 175-176
defining, 207-208
Success Analysis Matrix, 220, 221
success of project
goals in, 210-213
mapping characteristics, 214, 215
measuring, 219-222
modeling, 210-215
stakeholders and, 208-210
summary schedules, 152
sustaining engineering, 419
systems, implementation, 49
task forces, 90
task planning, 118-124
tasks in software projects
completion, 349
components, 348-349
dependencies between, 349-350
estimating resource requirements, 350-351
task summary bar chart, 129
team leaders, 216
team memory, 75
team work, 48, 224-225
benefits, 224
interactive planning process, 74
and interpersonal relations, 231-233
pitfalls, 225
planning and implementing, 227-231
see also project team
technical architecture, 365
technical baseline, 162
technical expertise, 249
technical management, 12
technical objectives, 56
technical performance measurement, 155
technology, 9, 39, 450
change, 42, 434
and design, 41-42
and information systems project management, 354-355
technology body of knowledge, 34-35
telecommunications industry, 433-438
tension, 26
time
constraints, 99-100, 106
emphasis on, 9
in international projects, 442, 452
timeliness, of cost data, 167
time management, 9, 14-15, 33
time objectives, 87
timetable for development, standardized, 380-382
time-to-market, cutting, 427-428
timing, 44-46, 56
see also milestone schedules
“To Complete” performance index, 194
top-down approach, to work structures, 137-138
top management, 239, 307, 430
attitudes, 46
and autonomous projects, 83
behavior, 318-319
and change, 300, 302
communication, 281
and international projects, 447
monitoring by, 97
and organizational change, 318
and product development, 420-421
and project management, 238
support, 250, 256
total project scope, 138
total quality management, 48, 49, 154-155, 428-431
training, 227, 230, 284, 443
transition, see change
trust, 253
two-boss syndrome, 391
uncertainty, 99
estimating in, 372-373
in research & development, 388-397
undistributed budgets (UBs), 186
upstream control, 264-265
U.S. government, project management and, 270-274
validity of information, 167
value analysis/value engineering, 197-204
history, 198-199
workshop, 201-203
variance in costs or schedules, 187, 193
analysis, 188-190
thresholds, 195
vendor list, 327-328
vision, 13
withdraw from conflict, 232
work accomplishment status, 180
work authorization, 158, 183-184, 417-418
work breakdown structures, 55, 63-65, 66, 122, 143, 145, 147-148, 182, 197
and estimating costs, 152
for planning, 120-121
pyramid, 136
for research & development, 390
work challenge, 252-253
work efforts, taxonomy, 9-11
work environment, 249
work packages, 138, 158
authorized, 182
measuring performance, 188
planned, 183, 186
work package schedules, 185
work plan, 22
workshops, 230
for team-building, 216
work structure, 131-142
content, 138-140
design and development, 135-141
detail level, 140
factors in success, 134-135
hierarchical information relationship, 139
reasons for, 132-134
rolling wave planning, 138
top-down approach to, 137-138
types, 140
worldwide competition, 424-425
writing documents, 26
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